ABC Menorca, part of CAEB, was created in 2010 to support British and English-speaking professionals living and working on the island of Menorca. As part of ABC Menorca’s commitment to improving the island’s economic climate, this is the first in a series of reports into different, tourist-related sectors, with the aim of identifying business opportunities, by quantifying the financial contribution made by different industries to the island.
In order to quantify the economic contribution made by second home owners in Menorca, ABC Menorca formed a subcommittee in mid-2010 to investigate average expenditure by these individuals, and/or their guests.
Three villa management companies submitted in-depth questionnaires to 133 property owners regarding the breakdown of their financial contribution to Menorca. This spending was split into 84 criteria, covering every single aspect of home-related expenditure. Owners were asked to provide full year spending, dating from 1st October 2009 to 30th September 2010, and to provide details of how many weeks their property was let during this period.
In addition, five villa management companies provided a breakdown of the percentage of their properties that have ‘letting licences’ (either by being listed with the Consell Insular pre-1998, or having obtained authorisation to be included on the tourist register post-1998), to give an indication of the number of second home owners that cannot let out their properties, even though they would like to, because they do not have island government authorisation.
Finally, these findings were contrasted with the Consell Insular’s list of second homes that have the appropriate licence and can be let legally, and data from OBSAM regarding the number of tourist beds on the island and seasonal peaks in Menorca’s population to attempt to calculate the size of the unregistered market.
Through the in-depth 84-point questionnaire, data collected from 133 second home owners provided a unique insight into the spending power of this tourist segment. ABC Menorca’s research found that between October 2009 and September 2010, visitors to these 133 properties spent a total of €3.6mn on the island, with key areas of expenditure including groceries, cleaning, car rental, nautical, pool and garden maintenance, and restaurants. Of these 133 properties, only 95 were rented during the study period for an average of 12.2 weeks each.
Key Findings – Expenditure
1. The 133 second home owners interviewed spent a total of €3.6mn on Menorca between October 2009 and September 2010 (see Table 1; Figure 1), which equates to an annual spend of €27,421 per property.
2. Daily Living Expenses, which includes spending on groceries, food and drink, in restaurants and cafes, on leisure activities, on clothing and on cleaning and laundry services, accounted for over €1mn, or 29% of the total.
3. Home Improvements, including plumbing, electrical repairs, minor repairs and painting among other expenses, was the second largest category of spend, accounting for €845,000, or 23% of the total.
4. Home Expenses, which incorporates mortgage payments, insurance, utilities bills, and major expenses such as kitchen appliances or furniture, accounted for €720,000, or 20% of the total.
5. Transportation, including car hire and nautical expenses, totalled 17% of spending. Maintenance, which covers pool, gardening and property management fees, accounted for 10% of the total. Other areas of spend include financial services, private health care and donations to local charities.
Table 1: Property Owners’ Expenditure 2010*
|Daily Living Expenses|
|Banking / Financial Services|
|Charity / Gifts|
*Figures are in thousands of euros
Source: Villa Management Companies
Of the 84 criteria used in calculating the total financial contribution made by the 133 second home owners and their guests, the following areas of spend stand out as having a positive and direct impact on Menorca’s local economy (see Table 2; Figure 2).
1. Grocery Expenses, including supermarkets and independents, accounted for nearly €480,000 or 13% of total spend.
2. Cleaning and Laundry Services accounted for around €329,000.
3. Car Rental accounted for around €267,000.
4. Nautical services, including boat purchase, maintenance, moorings and boat charter, accounted for around €184,000
5. Garden Maintenance accounted for around €146,000
6. Pool Cleaning and Maintenance Services accounted for around €115,000
Finally, second home owners and their guests spent approaching €141,000 in Menorcan restaurants (excluding cafés and bars) during the time they spent on the island.
Table 2: Key Areas Of Expenditure 2010*
|Cleaning and Laundry|
*Figures are in thousands of euros
Source: Villa Management Companies
Key Findings – Accommodation
According to the Consell Insular’s list of properties with a tourist letting licence, in 2010 there were 2,716 legalised properties on the island. Of these, 515 were granted authorisation from 1998 onwards, following Decree 8/1998, suggesting that between 1998 and 2010 an average of 43 properties were granted permission for rental to tourists per year.
According to figures published by OBSAM, in 2009, there were 49,826 tourist beds on Menorca – not including second homes with a letting licence. If the 2,716 properties authorised by the Consell have an average of 4 beds per property, that adds another 10,846 legal tourist beds on the island in 2010 giving an approximate total of 60,690 legalised places for visitors.
At the peak of the season, in mid-August 2010, OBSAM calculated that there were over 190,000 people on the island of Menorca. If registered residents (94,383) are subtracted from this figure, then that means there were around 95,000 tourists on Menorca during this month. Given that there were only just over 60,000 tourist beds available on the island at this time, that leaves a gap of over 35,000 visitors staying with friends, family, or in unregistered tourist accommodation (see Figure 3).
Figure 3: Difference Between Visitor Numbers And Registered Accommodation
|Legal tourist beds in Menorca (2009)*||49,826|
|Second homes with rental authorisation (2010)‡||2,716|
(an average of 10,864 beds)
|Population of Menorca (1/1/10)*||94,383|
|Peak visitor numbers to Menorca (10/8/10)*||190,850|
|Visitors in unknown accommodation (10/8/10)||35,777|
‡Source: Consell Insular de Menorca
Data provided by five villa management companies reveal that, on average, 89.5% of their clients would like to rent their second homes to tourists, but cannot do so because their properties are not eligible for a tourist letting licence.
Second home owners invest heavily in the island
Second home owners contributed, on average, €27,421€ per property to Menorca during the 12 months between October 2009 and September 2010. Given that second home owners and/or their clients, only occupy these properties for a few months a year, these figures show the valuable economic contribution they make to the island.
If this average expenditure is factored up to the 2,716 properties that the Consell Insular states has either a tourist letting licence, or is listed on the tourist authorisation list pre-1998, then total annual expenditure by owners and clients staying in legalised tourist property stood at €74.5mn in 2010. Again, illustrating that this sector brings widespread financial benefits to the island.
Second home owners make considerable investment in home improvements and maintenance. Enabling them to let out their properties legally would go some way to offer them return on their investment, and would bring additional economic benefits to the island too.
Second homes are occupied for very short periods of time
With average occupation periods of just over 12 weeks per year per property, second home owners visit, or rent, their properties for only a short period of time. If direct flight connections to the UK were improved, for example, permitting a weekend break on the island during the winter months, this would encourage increased occupation rates and bring direct economic benefits to the island.
Current registered tourist accommodation is insufficient
The disparities between legal tourist beds and peak visitor numbers are proof that (authorised) accommodation supply and demand are not aligned. Legalising additional second homes for tourist lettings would go some way towards correcting this discrepancy.
Villa owners want to legalise their properties, but cannot do so
According to information from five villa management companies, 89.5% of second home owners cannot let out their properties because of a lack of, or ineligibility for a letting licence. By granting on average just 43 property authorisations per year over the past 12 years, the Consell Insular has been very slow to respond to requests of second home owners to gain permission to rent their properties.
ABC Menorca believes that registered tourist accommodation offers visitors a guarantee of quality and that a simplified registration process would encourage home owners to legalise their properties, enable them to advertise these properties to attract clients, and this promotion would bring widespread benefits to Menorca’s tourist sector.
ABC Menorca recommends that in order to ensure Menorca’s tourist accommodation is of high quality and meets visitors’ expectations, the Consell Insular should accelerate the process of issuing tourist letting licences. In addition ABC Menorca recommends that the Consell Insular addresses the issue of land classification to ensure that properties owners that wish to rent out their homes are not be prohibited from doing so simply because of location. ABC Menorca believes that the entire island should be considered a ‘tourist’ area, as we all benefit – directly or indirectly – from the tourist industry.
ABC Menorca believes that the Consell Insular currently dedicates insufficient resources to the issue of letting licences, with just two inspectors responsible for all tourist accommodation on the island (hotels, apartments, villas, bars and restaurants). We recommend that the Consell Insular accelerates the emission of letting licences by reducing the amount of paperwork involved with an application and by having additional inspectors.
Poor quality, unregistered tourist accommodation does the island few favours. ABC Menorca recommends that the Consell Insular creates a new, or strengthens the existing, classification system for villas, so that potential visitors know exactly what their holiday accommodation will be like when they book. One alternative could be the creation of a Q for Quality system, especially for villas.
To discourage illegal letting, ABC Menorca would suggest the creation of an online catalogue of legalised properties, including photos and a quality rating and description of each property. ABC Menorca also recommends periodic inspections of registered properties to ensure quality standards are maintained. This commitment to quality could become Menorca’s unique selling proposition.
ABC Menorca recommends that the Consell Insular, ABC Menorca, ASHOME, Viturme, representatives from town halls, and other interested parties meet to discuss these proposals, and other suggestions. By doing this, we want to ensure that the island gains maximum benefits from the rental of second homes because, as our study shows, it is a sector with high spending power.
For further information, contact ABC Menorca Secretary Wendy Mitchell: firstname.lastname@example.org