Tourism PESTEL Analysis | Canary Islands

PESTEL

PESTEL as acronym stands for political, economic, social, technological, environmental and legal factors, which influence the processes within a n organization. It is an analysis, which concentrate on the environmental factors that influence the operational firm. Therefore, it is a mandatory and helping tool for managers to have better insights about the threats and opportunities and understand its majority that exist in a running business, which are affected by such factors. This analysis thus, provides a greater vision for managers for current and future purposes to compete on the market completely and effectively. The understanding of the environment that influences the business is crucial to have an overview and control of the organization to manage the plans with environmental effects. The firm, which does neglect the forces of environmental changes, hardly succeeds and survives the competition. The right apprehension of Pestel also provides a great strategy to managers about the existing external forces that affecting the business environment.

(P)olitical factors

The political environment that exists in a nation can have tremendous impacts on the execution of a business including the lodging business. Governmental issues influence the day-by-day lives of numerous subjects all over the Canary Islands and companies it is a must to develop ways to adjust to the political circumstances in the nation. The political methodology received by a nation influences the quantity of nearby guests and their capacity to go around the nation. The hotel industry of Canary Islands is highly dependent on the local and international visitors.

Year by year, the Canary Islands has been captivates a great amount of tourist from abroad.

Canary Islands are Autonomous groups of Spain with a membership as well in the European Union.

In the Council Decision of 20 June 2002 (2002/546/EC), taken on the basis of Article 299(2) of the EC Treaty, the Kingdom of Spain was authorised from 1 January 2002 until 31 December 2011 to exempt or reduce partially from the AIEM tax (“Arbitrio sobre las Importaciones y Entregas de Mercancias en las islas Canarias”) some products produced locally in the Canary Islands. The AIEM tax is generally imposed on products imported into or obtained in the Canary Islands. In the annex to the Council Decision is the list of products to which the above mentioned special measure applies. The difference in taxation between goods taxed on a regular basis and those to which is applied an exemption or partial reduction cannot be higher then 5%, 15% or 25% depending on the product.

In the Council Decision of 20 June 2002 the reasons underlying the adoption of the special arrangements were presented. The main sources of the problems faced by the Canary Islands are isolation and fragmentation of the market. This causes various difficulties mainly connected with higher production costs (transport, energy, supplies of raw materials, treatment of waste, etc). It also contributes to the low diversification of the economy which is weaker and more susceptible to negative changes than European and global markets.

In other words the special measures were introduced to counter disadvantages faced by the Canary Islands and thereby allowing the economy of the Islands to develop. They were especially targeted at strengthening domestic industry by increasing its competitive position, which is disadvantaged because of the location, structure and size of the market.

Also, they are unable to benefit from globalisation. The AIEM aims at reducing those disadvantages of the market of the Canary Islands. Data provided by the Spanish Government shows that positive effects were observed after the special measures were introduced, however the problems underlying the special tax scheme continue to exist. Therefore continuation of special measures is justified.

http://eur-lex.europa.eu/resource.html?uri=cellar:777c256b-adfe-11e3-86f9-01aa75ed71a1.0002.01/DOC_1&format=PDF

(E)conomic factors

The second factor, which influences the working process and the accomplishment of Hotel Costa Calero is the economic ones.

GDP growth forecast for 2015 and 2016 to 3.3% and 3.0% respectively. Overall, the greater economic dynamism encourages the creation of more than 60 000 jobs in the biennium 2015- 2016.

the consolidation of the price of a barrel of oil at relatively low levels compared to the average of 2014 can be a significant boost to the Islands’ economy in 2015 and 2016

the European Central Bank surprised with a policy of quantitative expansion of higher volume than expected, and has left open the date of termination of the program. These actions will promote a reduction in financing costs to the private sector, especially in economies such as Spanish where fragmentation of the European financial system resulted in higher interest rates for households and firms in other eurozone countries. This will support growth in new credit operations and enhance the good performance of domestic demand. Depreciation of the euro against the dollar, that will put the exchange rate around $ 1.1 / € 2015 on average BBVA Research estimates suggest that this depreciation of the euro 20% of its value in 2014 could boost the 0.8 pp Islands’ economy in 2015, the result of improved export competitiveness

Canary faces several challenges, most notably an unemployment rate still above 30%. Return the regional appeal, increase the participation rate of young people and, above all, of those over 54 (see Box 3) and accelerate job creation consistent with increases in productivity must be considered a primary goal for the sake of reverse the divergence of per capita income about major European regions.

On the revenue side, the approved budget reflects an increase in non-interest income of 3.5% compared to the initial forecasts of 2014, driven by increased resources Economic and Fiscal Regime of the Canary Islands (REF), which will be helped by the recovery in consumption and changes policy of the Tax on imports and delivery of goods in the Canary Islands (AIEM).

The tourism sector is the main engine of the Islands’ economy (around 30% of GDP ) and, during the last five years,

2014 closed again, posting record figures in the number of visitors. Indeed, the Canaries received 11.4 million foreign tourists, up 8% from the previous year. By country, the UK (4 million) and Germany (2.7 million), remain the main source markets.

Moreover, total tourist spending in the region also set a record with more than 14,200 million euros. This represents an increase of 7.1%

%, the fall in the average stay (-0.3 days) it is primarily responsible for this development. Also, other factors help explain this phenomenon. Although geographically, the fall of stay has been widespread among the major source markets, this decline has been most pronounced among travelers aged between 45 and 64 years and tourists with high income levels, which added a decrease in daily spending,

https://www.bbvaresearch.com/wp-content/uploads/2015/04/Situacion_Canarias_Abr15_Cap31.pdf

(S)ocial Factors

Canary Islands have a population of 2.104.815 wherefrom Lanzarote dispose of 141.940 inhabitants. Major percentage of this population is from Spaniard origin (109.178 in Lanzarote) and the rest of includes of German, Italian, Romanian, Moroccan, English, Columbian and from Chinese origin (These major nationalities from the population of Lanzarote are noted in the paper by their number of beyond one thousand from the residential nationality origin in 2014 (datosdelanzarote.com, 2014)). http://www.datosdelanzarote.com/itemDetalles.asp?idFamilia=9&idItem=6531

This means, that Lanzarote is a culturally multiple island due to its historically and up to present migration into the island/s.

The age structure in the Canarias is as follows; the age group from the total population under 16 is 22.2%, in Lanzarote is 27.3%, the working force from age 16 and under 65 is 56.9 in the Canary islands and 63.1% in Lanzarote from the citizens and finally people of age above 65 is 20.9% in the Canarias and 9.6% in Lanzarote (ine.es, 2014 and datosdelanzarote.com, 2014).

http://www.ine.es/jaxiT3/Datos.htm?t=2853

http://www.datosdelanzarote.com/itemDetalles.asp?idFamilia=6&idItem=6648

Education in the Canary Islands is compulsory for children below the age of 16 (gobiernodecanarias.org, 2010), which is a free for this aged population. Primary education is compulsory, however the rate of school leavers is 35% of the population between age 18 and 24, which might be caused the inefficient share of knowledge, demands of skill obtaining, low levels of standard education, however, according to Social and Political Pact, by 2020-2025 85% of the population would be compulsory to dispose a certificate from intermediate education (ec.europa.eu, 2012).

http://ec.europa.eu/regional_policy/sources/docgener/studies/pdf/rup_migratory/canarias/ex_sum_canary_en.pdf

http://www.gobiernodecanarias.org/educacion/5/DGOIE/PublicaCE/docsup/Estudiar_en_Canarias_Ingles.pdf

(T)echnology

Technology is one of the variables that could directly influence the business operations. The use of development in IT helps to maintain a smooth communication and operation in the organization and with customers as well. It largely influences the marketing and promotion of the products, so the say the service. The way of communication is changing to web based techniques. Hotel Costa Calero can be reached through their official website and social media such as Facebook, however their website should develop their channel, because of their discomposing appearance from their disordered outlook.

The location of Canary Islands make possible to get around it by plane only. There are eight airports altogether in the Canary Islands and have an extensive network of highways. Numerous airlines established long distance flights to the islands such as its low budget known Ryanair, which is a great opportunity for those visitors who have limited budget for vacations. There are large ferryboats that link islands as well as fast ferries linking most of the islands.

The increased use of tablets and smartphones is creating a convergence of e- and m-payments.

M-payments are increasing at a rapid pace with non-banks slowly increasing their share of transactions. From 2011-2015, m-payments are expected to grow by 60.8% to 47.0 billion transactions.

The mobile payments space is increasingly competitive, with banks and non-banks striving for market dominance and consumer loyalty.

The slight slowdown in e-payments growth (from 19.2% in 2012 to 15.4% in 2013, a total of 29.3 billion transactions) has been due to a shift towards m-payments use, driven by increased penetration of smart phones and the internet, advancements in technology, and innovative products and services. Going forward, e-payment transactions are expected to grow in Europe as progress is made on the European Union’s revised Payments Services Directive (PSD II).

https://www.worldpaymentsreport.com/The-Convergence-of-E-and-M-Payments

The Canary Islands have been able to transfer successfully to their African neighbours their own expertise and technological developments, mainly in the renewable energy and water technology sectors, for providing basic services such as electrification and water supply services to isolated rural communities.

The Canary Islands Government is deploying in the region technology parks specialising in adaptive technologies for development.

Water treatment:production of 600,000 m³desalinated water per day. The first desalinating plant in Spain was inaugurated in Lanzarote in 1965.

Solar energy:more than 2,500 sunlight hours per year, with a radiation of 5-6 KWh/m²per day. Photovoltaic systems operate with the production of more than 1,700 hours.

Wind power:constant winds with average speeds of 6 to 8 m/s provide wind farms the equivalent to 3,000-4,000 wind hours.

Geothermal energy:there are two projects currently in progress.

These renewable energies can be implemented into the hotel industry to Hotel Costa Calero specifically for electricity purposes and to expand and develop it to other firms and association for variant countries.

http://www.canaryislandshub.com/en-us/sectors/naturallaboratory.aspx

(E)nvironmental factors

This factor became important in the last fifteen years because of increasing scarcity of raw material, pollution targets, doing business as an ethical and sustainable company, carbon footprint targets set by government. These are just some of the issues marketers are facing within this sector. More and more consumers are demanding that the products they buy are sources ethically and if possible from a sustainable source.

The European Union emphasizes waste management as one of the most important issue of political movement with the elementary factors such as reduction in the volume of waste generated, optimization of recycling, reuse and safe disposal.

Waste treatment Waste treatment companies2 , both of urban and non-urban origin, managed 44.9 million tonnes of waste in the year 2012, which is 10.0% more than the previous year. 96.1% of the managed waste corresponded to non-hazardous category, reaching 43.1 million tonnes (10.9% more than in 2011). Conversely, hazardous waste stood at 1.8 million tonnes (8.6% less than in 2011). Of the total waste, 53.6% was sent for recycling, 39.6% for dumping and 6.8% for incineration.

In total, 24.1 million tonnes of waste were recycled in 2012, the main categories being Metallic (10.1 million tonnes), Paper and cardboard (4.9 millions) and Animal and plant (2.2 million) waste.

In the Canary Islands altogether the population created 44.9 million tonnes of waste in 2012, which is increased compared with the previous year with 10%. 96.1% of the gathered waste complemented to non-hazardous category, which 43.1 million tones from the total. The hazardous waste from the total was 1.8 million tons. From the total waste 53.6 % was processed in recycling mode, 39.6 % was dumped and 6.8% was incinerated. This means, in total 24.1 million tons was recycled in 2012 wherefrom the waste was metallic (10.1 M), paper and cardboard (4.9 M) and animal and plant (2.2 M).

(L)egal factor

The Canary Islands have extremely transparent fiscal regulations, fully approved by the European Union and Double Treaty Agreements signed by Spain. Recently, several actions have been adopted to combat tax avoidance and offshore tax As an European region, the Canary Islands are subject to the European legal system, and, as an autonomous community of the Kingdom of Spain, all the national regulations are applicable in their territory.

The EU legal system has one of the highest standards of international legal security, which results in higher protection for companies based in the Canary Islands in many aspects, including data protection, free competition and financial regulations, evasion by the OECD and the G20 governments. These transparent fiscal regulations , administered by the Economic and Fiscal Regimen of the Canary Islands (REF), benefit companies through legal process cost reductions.

Instead of VAT, Canary Islands use IGIC, which is an indirect tax and it makes possible to create and sustain efficient businesses among different countries that dispose with the ease and balance the isolated geographical location of the Canarias.

http://ec.europa.eu/regional_policy/sources/activity/outermost/doc/plan_action_strategique_eu2020_canarias_en.pdf

Moreover, currently Costa Calero lacks of the mobile application service, which might be advised to keep up with this technological trend.