Academic journal article Journal of Financial Education

Hotel Riscal for Wine Aficionados

Academic journal article Journal of Financial Education

Hotel Riscal for Wine Aficionados

Article excerpt

"We have been producing some of the finest wines from our vineyards and facilitates here for more than a century and now you propose that we construct a hotel? While I know that tourism is an important component of Spain's economy, as well as the Rioja region, I am not convinced that this project will make much of a contribution."


This was the response of the managing director of Vinos de los Herederos del Marqués de Riscal S.A., winery with a cellar dating back to 1858.1 The proposal was the result of a conference attended by Ricardo Hedo and Maria Batista, two of the firm's younger and newly hired MBA graduates in 1999. In one of their classes they had studied and learned that approximately 12 percent of Spain's GDP was generated from tourism. One of their projects involved a hotel operation in Barcelona, and they had visited La Rioja wineries during a summer vacation. They had observed that, while tourists from Spain as well as the U.S. and other European countries, were visiting the region, there were few facilities being constructed for extended stays.


The economy of Spain had grown at more than 3.5 percent from 1990 to 1999, as measured by its GDP, one of the strongest performances of any country in Western Europe. Employment gains accounted for more than one third of all those in the Euro area, even though Spain's population was just 15 percent of the area total. The unemployment rate had trended downward and was significantly below the levels of a decade ago.

Population growth, fueled by immigration had been greater than any other country in the Euro area except Ireland. Along with declining interest rates since entering the Economic and Monetary Union (EMU), these two powerful forces had contributed to net government debt declining to approximately 40 percent of GDP in 2001, compared with 50 percent just five years earlier. With more than 60 percent of the labor force supplying services and another 12 percent employed in construction, the influx of immigrants played a critical role in sustaining growth and holding down inflation pressures.


Tourism in Spain was an important component of the economic health of the country. Approximately 12 percent of Gross Domestic Product in recent years could be attributed to visitors from within and outside the country. The Institute for Tourist Studies (I.T.S), a division of the Ministry of Industry, Tourism and Trade, defined visitors as tourists who stay overnight and same-day visitors who do not stay overnight.

Overnight visitors (tourists) made up over 64 percent of total visitors in 1995, declining modestly to 61.0 percent in 2004. (Table 1) Interestingly, the number of tourists approximated the total population of the nation! Spain had always been a preferred tourist location for Europeans as well as visitors from more distant countries such as the United States. Prime reasons for visiting Spain for vacations revolved around three factors, sun, sea and sand. Spanish weather was conducive to the travel plans of many and provided the sun while the country's long Medi- terranean coastline provided the sand and the sea. The major cities of Madrid and Barcelona attracted so-called cultural tourists, while younger travelers could hike trails, climb mountains (the Pyrenees in the east and the Sierra Madre in the west.)

From 1997 through 2001 the largest source of foreign tourists was the United Kingdom, just about 29.8 percent in 2004, up from 25.7 percent in 1997. Germany was the next largest source of tourists at roughly 18.2 percent while France was third at approximately 14.8 percent. Italy came in at 5.3 percent, the Netherlands and Belgium represented about 4 percent respectively while the United States was just under 2 percent.

In Table 3 data show the reasons for trips to Spain and it is quickly seen that leisure activities and holidays are, by far the largest market segment, over 80 percent in each of the last five years. …

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