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Spanish Beer Isn’t Flowing and Brexit Is Part of the Problem

Spanish Beer Isn’t Flowing and Brexit Is Part of the Problem

(Bloomberg) --

The beer isn’t flowing like it used to in Spain’s tourist hotspots, and Brexit is part of the problem.

Sterling’s decline has made U.K. travelers even more price sensitive this summer holiday season, pushing some to choose cheaper beach destinations in Turkey, Egypt and Tunisia. Fewer British visitors means not as many cold brews being downed. Tourists from the U.K. and elsewhere drink around 25% of the beer consumed in Spain annually.

“The fall in the pound affects their spending power in Spain,” said Jacobo Olalla, head of the brewers’ association Cerveceros de Espana. “It’s something that could get worse if there’s a hard Brexit.”

Spanish Beer Isn’t Flowing and Brexit Is Part of the Problem

British tourists have an outsize impact on Spain. It’s their top destination and about 18.5 million visited in 2018. That makes their ebbs and flows important not just for beer and food, but the entire tourism industry, which accounts for nearly 12% of Spain’s economy.

The pound is down about 16% versus the euro since the 2016 Brexit vote, and reached the lowest in almost a decade this month. In June, the number of British travelers to Spain fell 5.3% from a year earlier to 2.1 million visitors, the weakest start to the summer season in four years.

Overall, the number of international visitors to Spain is still rising, but the pace has slowed from the double-digit rates seen in 2016 and 2017. Similarly, growth in beer consumption is also losing momentum.

Olalla says bar and hotel managers have been warning him of a slowdown, and Spanish brewer Mahou-San Miguel Group has noticed weaker sales, particularly in the Canary and Balearic Islands.

It’s not all the fault of the U.K. and its battered currency. The collapse of German budget airline Germania has meant fewer available flights to the Canaries, according to Carlos Cendra of Spanish travel analytics firm Mabrian Technologies.

Spain is also dealing with cheaper competition around the Mediterranean.

British tourists who travel abroad every summer are typically looking for resorts they can book through a tour operator. Many are indifferent to location, tourism executives say. The deciding factors are price and safety.

The average cost of a room in a three-star hotel booked on Spain’s Costa del Sol is 87 euros per night, more than double the price in Antalya, Turkey, data from Mabrian show.

Add in weaker sterling and that’s making British travelers even more price sensitive.

Spanish Beer Isn’t Flowing and Brexit Is Part of the Problem

Spanish destinations saw a pickup when a spate of deadly terror attacks in Tunisia, Turkey and Egypt drove tourists away. While concerns aren’t entirely eliminated, attacks targeting tourists have become somewhat less frequent.

Bookings from the U.K. to Spain have fallen by around 3% this summer season, according to GfK Travel Insights. Turkey and north African countries including Tunisia and Egypt are up nearly 40%.

“The weakness of the pound against the euro is the most likely cause for holidaymakers’ willingness to venture further afield,” U.K. tour operator Thomas Cook said in April.

There are also signs that British tourists’ flagging interest in Spain could continue.

Mark Buchanan has noticed a drop in bookings for 2020 with his company, The Spain Event, which organizes bachelor and bachelorette parties in Spain.

“The reasons for reduced expectations for U.K. tourism are down exclusively to our good friend Brexit,” he said. “It’s not so much visas and ease of travel but the effect it already had on the pound and the impoverished economic outlook for the U.K.”

To contact the reporter on this story: Jeannette Neumann in Madrid at jneumann25@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Charles Penty

©2019 Bloomberg L.P.