The bad example of turistification

In the long term, since 1970 capitalism has suffered a long crisis and there has been a recomposition of the economic sectors in the economy of the Basque Country. The impact of industry on gross domestic product has been significantly reduced: It was 50% in 1975 and 22% in 2020. This deindustrialization has driven a service-based economy, and two are the basic axes of this productive model, construction and tourism.

The first, construction, suffered a severe blow in the “Lost Decade” that began in 2008, despite the fact that in the last three years it has experienced a slight upturn. In 2008 there were 135,000 people in this sector, while at present there are 67,000, as the previous crisis broke out with the cement bubble. The second pillar is tourism, known as the “Guggenheim effect”, which has had a great influence on the coast and in Basque cities. As a result, the growth of the hotel sector has also been spectacular, with a notable increase in bars, restaurants, lodgings and hostels. Commerce and the transport network have also followed a planning aimed at tourists and, as a result of this model, leisure activities such as music festivals or the internationalization of local festivities have also multiplied in recent years. But tourism has been disrupted by the pandemic.

In any case, it should be noted that hospitality is a sector of productivity, wages and low performance, a clear example of a model of deficient specialization. Before the COVID-19 crisis, the diagnosis of the employers in the sector was pretty dark: half of the bars and restaurants suffered losses, 40% came to the end of the month working long hours and only 10% had good results due to their location, business model or other factors related to innovation.

In short, in the hospitality sector many hours of work are done and in return low wages and benefits are obtained. This sector must adapt to the situation on a seasonal basis, it generates unstable living conditions in the long term and runs the risk of serious accidents in itinere. In addition, the sector is a champion in violation of labor rights due to fraudulent contracts and black wages, among other reasons.

Impact of the pandemic

Social Security membership has undergone significant changes. Of the 12,400 jobs lost in the peninsular Basque Country during the pandemic, 5,750 are in the hospitality industry. It has suffered a heavy wreck, particularly until the end of summer, as in September employment was partially recovered. Developments in the sector will have to be seen in the coming months, as the completion of the old employment regulation dossiers, or the avoidance of new ones, can make redundancies a trend in the immediate future.

In addition, we must put the sector in a global context. From the employment point of view, hospitality accounts for 8.1% of all employed jobs, while in the gross domestic product the contribution of hospitality does not reach 6%. However, the sharp decline in activity and the number of workers has not led, at least, to the closure of bars, restaurants and accommodation, and the number of affiliations of the self-employed in the sector has remained very stable.

The evolution of recent years shows the strength of the sector until recently, and shows that business chains or investors have opened up more and more places, especially in the strategic points of tourist attraction. The concentration in the sector is also evident as a result of the dynamics of capital accumulation. In any case, one of the consequences of the pandemic will be that many businesses will have to close it, and the participation of investors and companies run by investment funds may be increased again.

On the other hand, there is a sector that is rarely mentioned, that of suppliers. In this case, companies are larger and more able to cope with this very black situation. However, it is also expected that redundancies and a reduction in staffing levels will occur.

Action taken by Governments

The measures and regulations implemented in the hospitality sector are being very controversial. On the one hand, some of the measures are far from precise. On the other hand, and in the opinion of the hotel owners, they are not enough.

The toughest closure is that of Bizkaia, Gipuzkoa and Álava as of 7 November, in Navarre as of 21 October and in the continental Basque Country as of 24 October, especially since the sector has not yet been recovered from its previous closure. In the accounts of the Spanish Government, two new types of temporary employment regulation dossier have been launched because of obstruction to the development of the activity, which is being applied in hospitality, and temporary employment regulation due to limitations on the normal development of the activity, which can be requested by suppliers. These measures partly exclude corporate social security contributions by wage earners, but do not take account of the share of self-employed persons.

In addition, the Basque Government and the Government of Navarre have announced that the Vitoria-Gasteiz Executive will offer a number of aid. In the case of the Basque Government, direct aid amounts to EUR 45 million, as announced this week. In particular, establishments with fewer than 3 employees will receive aid of EUR 3,000; those with 4 to 10 employees, EUR 3,500; and those with more than 10 employees, EUR 4,000. Companies with more than 51 employees are excluded from this aid. It has also been agreed with Elkargi that a financing line of EUR 100 million should be opened.

In the case of the Government of Navarre, the budget allocation for direct aid to the hospitality sector has doubled, from the initial 10 million to the 20 million. Hospitality establishments will thus be able to receive a maximum of EUR 25,000. In order to assist the businesses most affected, the Government shall exclude from the aid those who do not justify with VAT a loss of more than 20% of their ordinary income. In order to determine the situation of each of them, the VAT returns for the first three quarters of this year will be compared with the 2019 declarations.

Among the measures, nothing is said of the rents, where in hospitality the highest cost of many businesses is usually the rental. The time has passed since a moratorium was applied to the large owners, which applies to those who have more than 10 dwellings or premises, or to those who have more than 1,500 square meters, but in the hospitality sector small owners predominate. Therefore, the possibility of reducing the cost of renting is left to negotiation between the parties.

In the tax field, the Government of Navarre has agreed to abolish the Economic Activity Tax on all self-employed workers with a turnover of less than EUR 1 million. In the case of the Provincial Councils of Álava, Bizkaia and Gipuzkoa, they note that new tax measures will soon be published. They also propose another path, indebtedness, through ICO and Elkargi credits.

Are the measures taken sufficient?

Employers in the sector and workers denounce that the measures are scarce and the feeling of the workers is that governments are improvising and that the situation in the sector remains dark. On the one hand, direct subsidies are being offered to prevent the decline in business. This aid is essential to overcome this first blow, but it is also insufficient for a number of reasons. Firstly, it should be noted that fraud is a common practice in the sector, both in social security and in finance, so the economic benefits that many businesses declare at the end of the year are lower than the real ones. Therefore, the offer of direct grants should be linked to compliance with these, so that the measure is appropriate.

On the other hand, no effective measures have been put in place on rents or mortgage loans. Nor has there been a moratorium on the payment of rents, and in the end, albeit indirectly, this will also lead to the closure of many businesses. In fact, in most cases, the rental of the premises should be agreed with the owner through a private negotiation. As no effective measures have been taken on mortgage loans, financial institutions have their income secured to the detriment of hospitality businesses. Therefore, if the desire to collaborate with the hospitality industry is real, a way of suspending loan payments should be established. Does the hotel industry not deserve real support? Don't the hospitality industry deserve the same help since 2008? Are they making a class distinction between sectors?

Restructuring of the hospitality industry

It has to be put on the table that this context of pandemic and crisis will last at least two years. At the moment we are facing the first blow, and many hosteleros will close the premises. Therefore, in hospitality a restructuring plan should be made for the sector, as in the past (e.g. in the 1980s) with other sectors: beyond offering economic aid, the relocation of the people affected must be helped, and the most serious error of 2008, i.e. the abandonment of the public, as was the case with workers in the construction sector, must not be repeated. It should also be noted that many of the workers in the hospitality industry have lost their jobs in the construction crisis. Will we let them be expelled again? And, continuing with the restructuring, we cannot ignore the impact that this crisis will have on the supplier sector.

The only way that many self-employed people are offered is to get into debt through ICO loans and loans subsidised by Elkargi. This measure can lead to more problems, as many people, in addition to running out of business, are going to be indebted. In this context, it will be necessary to promote the implementation of the Second Chance Act and to set limits for financial institutions that flexibify the payment of debts.

Hospitality workers will be the hardest hit, as they have precarious and precarious working conditions, and often also suffer labour fraud (in recruitment, in payments…). All this adversely affects their unemployment benefit. In addition, many will not return to hospitality work. It is therefore essential to promote diversification and provide support, promoting career change pathways, directing them towards new jobs, both in agriculture, in strategic industries and in the new public-social sector.

Finally, we must not forget the tremendous impact of the sector on culture and leisure, highlighting the serious situation that these activities have as a result of the pandemic. For example, the link between hospitality and music is evident, and we should rethink how to transform these relationships. Likewise, the “earthly” must be left aside to recover the street for pedestrians and non-consumers, and to promote new public and social meeting spaces that complement the function that hitherto has been performed by the hospitality industry. In other words, gaztetxes, coffee theatres, culture houses, markets, txosnas, public bathrooms … and create a socio-cultural plan that protects the entire staff.