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The hospitality industry in Costa del Sol will face a difficult season, as Europeans’ spending power is dwindling. This means that the accommodation prices in the area need to be adjusted to reflect the current economic reality.
The Asociación de Empresarios Hoteleros de la Costa del Sol (Aehcos) has reported a projected occupancy rate of 88.32 per cent for August 2025, which is not bad, but a notable decline of 4.57 percentage points from 92.89 per cent in August 2024. This follows a troubling trend observed in July, where the Gross Average Impact per Guest (IBCA) plummeted from €198.61 to €157.18, despite a slight occupancy increase to 87.82 per cent. “We’re filling rooms almost the same, but earning much less,” said Javier Hernández, Aehcos’s executive vice president, expressing what he sees as the core issue: reduced consumer spending capacity.
Drop in spending affecting Costa del Sol profits
In certain European markets, the decline in purchasing power is especially evident. Recent data show that Europe’s spending power is decreasing in general. Countries like France, UK, Italy and Romania are facing significant economic pessimism. In France, 70% of consumers are concerned about the economy, and spending on clothing is down. In the UK, only 34% plan to take a vacation abroad occasionally, which is the lowest percentage among all the countries surveyed.
Romania also shows a similar tendency to bargain hunt. In the Malaga Province tourism sector, 70 percent of guests were foreign, yet spending per person fell over 20 percent. Profitability was severely affected after businesses on the Costa del Sol chose a high-end luxury business model.
Costa del Sol too expensive for many Spanish holidaymakers
Spanish holidaymakers are also suffering, choosing to spend more time in foreign destinations that are cheaper than the traditional Costa del Sol. Inflation and decreased purchasing power are largely responsible for this. Aehcos reports that although domestic tourism will increase to 40% in August, from 30% in July, the level remains below that of pre-pandemic. Bookings are also made more than half the time, and at least a month in advance of arrival. This can complicate pricing strategies and staffing planning. Hernández has stressed that the sharp IBCA decline is the most worrying metric, as it threatens the long-term financial viability of hotels and restaurants despite high occupancy rates in areas like Fuengirola (92.58 per cent full), Benalmadena (92.37 per cent full), and Torremolinos (92.20 per cent full).
Costa del Sol business owners need to adjust their accommodation prices back to the pre-pandemic period to remain competitive. Hernández pointed out that destinations like Punta Cana in Mexico offer lower costs due to cheaper workers and raw materials, which puts pressure on the Malaga Province to recalibrate prices.
Despite these challenges, the region still has an extremely strong appeal, with a 76 per cent annual occupancy rate and recent investments like a new five-star Meliá hotel in Marbella. However, the interior regions, such as Axarquía and Serranía de Ronda, are struggling much more than coastal hotspots.
Costa del Sol profits down, but not out
In September, forecasts indicate a further drop to 86.96% occupancy, down 1,78 points since 2024. Only Benalmadena, Torremolinos, and other coastal towns are expected to surpass 90%. Francisco Salado remains optimistic, however. He mentions the 155,000 tourism jobs, new international routes such as Malaga – New York, and upcoming Malaga – Beijing flights that are expected to diversify the market. He admits, however, that there is a need for “reflection”, as domestic tourists seek more reasonable options.
Hoteliers and restaurateurs in Malaga are trying to find a balance between competitive pricing and profitability to maintain the tourism-driven economy of the region.
