Comparative, and Chocolate-y, Economics

Comparative, and Chocolate-y, Economics

As always in life, when the future is cloudy, I’ve looked around to see what other folks in my same boat, but different seas, were up to.  So, for the virus’ effects on tourism-based economies I started studying Florence, Italy and Barcelona, Spain.

Both cities are larger than San Miguel de Allende but have historic architecture combined with modern amenities for their tourism-based economic backbone.

Like here, after years of relentless gentrification in their downtowns, retail rents had reached levels that many businesses could no longer pay in both European cities. Petty street crime, much of it targeting tourists, had become rampant, and in some cases violent. The only way for businesses to pay their rents and still survive was to target big-spending foreign tourists (well, in the case of San Miguel, foreign-ish tourists from Mexico City). But, with the virus, they’ve gone and if they do come back, it will be in smaller numbers and with shallower pockets.

Facing the prospect of continued sluggish/non-existent sales, many businesses, rather than taking out more debt to pay their rents, have simply shut up shop. Yet despite the glut of properties on the market, the rents being advertised in Europe and here are still absurdly high, suggesting that many of the property owners, most of them well-heeled local families, haven’t accepted that market conditions have changed dramatically.

Regardless of rents, Barcelona, Florence, San Miguel de Allende and other tourism-oriented cities are about to have their quietest summer on record.

For many local foreign residents who put up with all the side-effects of unfettered mass-tourism, they’ve enjoyed a welcome change. But for those whose jobs, businesses and rental income depend on tourism, the pain has only just begun. And it’s likely to end up affecting even those ex-pats who are currently enjoying the creepily eerie sight of quiet streets

I suddenly realized, not for the first time, I’m an idiot!  No need to look across the pond to see our future, just look up (geographically) to my hometown of Hershey, Pa or Chocolate Town, USA.

Unlike our European counterparts, Hershey  and San Miguel are about the same size.  Whereas we rely on folks from Mexico City to come on the weekends and summers, Hershey counts on New Yorkers.  Either way, tourists come to shop, stay at high end hotels, attend concerts, visit museums and bathe in tubs of chocolate (ok, that may just be in Hershey, alongside visiting the Disney-esque amusement park).

The other big difference to Hershey is they’ve got the world-famous Hershey Medical Center where presidents go to have heart surgeries on the sly.  Suffice to say it’s a big employer.

Though, obviously, Hershey’s history is shorter (no pesky Inquisition there) they were both, in recent history, one-industry towns.  Well, we still are as the muslin making factory here closed in the 1990s just as the chocolate factories did in Hershey and both now lean towards tourists instead.

Sidebar:  When I was kid Hershey smelled of chocolate.  Today the factories are here in Mexico, including nearby Silao by the Guanajuato airport.  Whereas Hershey chocolate is cheap in Pennsylvania, it is rather costly at La Comer despite the widely different shipping costs.  Go figure.

So how is Hershey’s tourism doing these days?  Again, a lot like us.  Both have border issues, not with each other’s country, but within states.  Just like in the Atlantic side of Canada, you can’t really travel freely between states/provinces anywhere lately.

Hershey Park itself is still closed, though oddly the adjacent zoo is open.  The breweries, museums, spas and shops are also closed.

Tourism is a tricky puzzle.  Economic models show growth as a tourism destination is always slow, inching up over time, whereas the decline part of the curve is always steep and rapid.  Take a few pieces out of the puzzle and the overall picture makes no sense.  Hershey, like San Miguel de Allende, can’t flourish without all the pieces of tourism being in place.

I’m not suggesting business as usual and let’s open up everything now.  Quite the contrary, I see no point in opening one piece (stores, for example) while places for shoppers to stay or eat (an obscene amount of chocolate in one city) are still closed.  Tourism is all or nothing, and best to wait until, whether in Pennsylvania or Guanajuato, to when we can be our authentic selves to open back up.