The Back Seat Of My Car

We are in a period not of price inflation but of outrage inflation. It continues. It was the cost of car hire (again) yesterday. At least someone had the good sense to right the gross coffee distortion by penning a note to "The Bulletin". But elsewhere we were told that the "alleged" shortage of cars to hire and their inflated prices is a situation the industry has created. Well yes, that's true but only in the sense that lack of access to finance has been the primary cause of fleet reductions. If people want to beat up on anyone, then let it be the banks. I say once more, however, this is a situation that has been known about for months; it should come as no surprise. Moreover, it is not a situation unique to Mallorca nor indeed Spain. Similar gripes are to be heard from tourist armies in the likes of Tuscany, wishing to motor around the green lands of northern Italy in a formerly less expensive Alfa Romeo cabriolet.

The regular calls for "government" or "authorities" to "do something" are laughable if they come from those who, under different circumstances, are only too happy to be the beneficiaries of a market relatively free and unhindered by central intervention. Perhaps they might wish to call on governments to prevent the making of profits on the sale of property (not great at the moment admittedly, but that, strange to report, is because of the workings of the market). There is a sense of having cake and eating it as well about all this. Or anywhere but the back seat of my hire car.

One writer called on the paper to pass on letters to the "authorities". Were it to, the "authorities" would no doubt say gravely that they will look at the matter, pose for a photo and do precisely nothing. Or, they will have a word, to which the reply will be - you lower our rents and our taxes and then we'll talk about prices.

The government could, one supposes, "do something" were it minded to. The tourism industry in Mallorca is a strategic industry. One element of that industry, the hotels, is to benefit from low or zero finance, courtesy of the Balearic Government, in order to undertake certain redevelopments. This, so the theory goes, will help to kick-start the other strategic industry - construction - while bringing about upgrades in hotel stock that are deemed necessary in the face of competition from other destinations. But the hotel sector is fundamental. I'm not sure the same can be said about hire cars or indeed bars and restaurants. The government would only "do something" if it somehow had hold of the purse strings. The hotels have been told they can create spas and the like within existing complexes but they can't actually build out - these are the terms on which that finance is available. Were there to be a central fund for other sectors that serve the tourism industry to avail themselves of, then the government would be able to "do something", such as, perhaps, impose certain constraints on prices charged. But why would they? To do so would require an accord with the banks, who would otherwise see a source of their business taken away, even if they might be currently disinclined to lend finance. And you would end up with a quasi-nationalised bank to fund aspects of the tourism industry, with strings attached. It wouldn't happen. Even were such a system of finance to be created, it would have to be applied across the board. The car-hire sector is not a special case.

Yes, there are examples of higher prices this year, but there are also examples of small companies benefiting. They are taking up the slack from the larger agencies unable to meet demand for cars. They may well be charging higher prices, but they are also being given a shot in the arm.

One should not underplay the potentially bad PR that high prices create, but one needs to be aware of the short-term circumstances that have brought about these prices; circumstances not of the car-hire agencies' making. These are circumstances being repeated in other countries as well. Were the current charges being quoted by some agencies to persist, once normal circumstances are re-applied, then there would be cause not just for concern but also for genuine accusations of profiteering. But these are unlikely to arise. There are also suggestions as to the operation of some sort of cartel. I would like to know what evidence there is for these allegations. Despite what some might argue, rules of competition do actually apply in Mallorca, both in the legal and the market sense of the words.

And those rules of competition bring one back to what goes on in the bars and restaurants. It is they, above all else, that go to shape prices and products. If a café does indeed charge 3.50 euros for a coffee, well that is its affair. If the one next door is charging the normal 1.50, then the 3.50 café may not be in business that long, but it depends what sort of a place it is. One of my email correspondents, Lynne, points out that bars etc. are supposed to display their officially stamped price list. The point being that you can check the price before ordering. Don't like the price, go somewhere else. But maybe that 3.50 café has an ambience or style that you do like. More expensive, but you pay a different price for different products. That's the market for you.

Wrapped up in all these complaints about prices is an unrealistic notion that somehow bars and the rest have an obligation, a responsibility to the resorts and the island as tourist destinations. They do not. Their responsibility is to themselves. And it is their responsibility to price and to provide product that the market demands and that has an edge over the competition. Let me tell you about external responsibility, or how it was summed up by the assistant director of Bellevue. There is none, except for the environment. In Bellevue's case, they do what they do - his words. And so it is for any business, be it bar, restaurant, or whatever.

Glen, another correspondent, in the context of the gripes about bar prices, wonders whether the only reasons that some people go on holiday are to eat and drink. It's a fair point, and the impression some of these letters gives is that these are the reasons. Oh, and hiring a car as well. Someone else made the point to me the other day that the Brits seem to believe that wherever they go on holiday it should always be cheaper than at home. The car-hire issue is one thing, but as for the rest ... you make it as cheap or as expensive as you want, but please spare us these spurious conclusions based on specific and arguably isolated examples. And I maintain that the crisis and the exchange rate have heightened awareness as to actual spend, causing a perception of higher prices even where these do not exist. To repeat from yesterday - just give it a rest, please.


QUIZ
Yesterday's title - Steve Miller Band, "Midnight Tango", http://www.youtube.com/watch?v=H3VT-NpsjyY. Today's title - line from a car song. Swedish.

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