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Tourist Gibraltar: works in progress

Sponsored post: “A shipful of visitors can mean a 10 per cent boost to the population” - Neil Costa MP

Neil Costa is a man with things on his mind. He is the minister for tourism and public transport in Gibraltar – to give him his full title he is Hon Neil Costa, MP (one of his predecessors was named Holliday, and yes, of course they’ve heard all the gags). Costa isyouthfuland energetic and liaisesclosely with the jurisdiction’s Tourist Board. The board’s chief executive, Nicky Guerrero, is equally occupied.

It’s a tiny peninsula so nobody works terribly far from anybody else, but along with several other officials, the ministerworks from Europort, the large concrete and arguably faceless building towards the south of the Rock. It is of course the job of the minister and his CEOto persuade incoming tourists that the territory itself is anything but faceless. In fact, Costa has a particular subset of this aim in mind; he wants to encourage guests from staying just one night (if that; the Rock is well known for attracting day trippers) and encourage them to stay longer. He is also determined to attract visitors from territories thathaven’t previously been in the habit of sending many tourists over. The opportunity for the right entrepreneurs is clear – if he succeeds, there will be many pickings for people with the right business ideas.

“We have to develop our visitor profile,” confirms the Gibraltar Tourist Board’s Guerrero. “The majority of our visitors come for the day across the border. A lot of them will be people who are already holidaying in the areas around Gib, and we also have people from ships. There are 180 visits scheduled to Gibraltar from cruise ships, and the ships are getting bigger,” he says. “Some ships will have up to 3,000 passengers on board. That’s effectively a 10per centboost to the population, in a single day – except one day this year wehad four ships in one day.”

As well as people visiting Gib as a destination in its own right, a large number use it as a transit point, says Guerrero. “They come to us and use our airport because they prefer it to the ones in the surrounding areas,” he says. “So we have quite a mixed profile of visitor, and they each require a different strategy and different marketing.”

So if there are that many visitors on a rock of six square miles, why does the profile need building? “We are trying to attract more people to stay overnight,” Guerrero says,“from the UK and other markets in Europe. The UK remains a core market and will do so for the foreseeable future. This isn’t just because of the obvious connection of Gib being British by history, but air connections are well established. Brits can be here in two or three hours, which adds to the ‘day trip’ nature of the destination.” This is something the board finds frustrating, as does the Chief Minister, Fabian Picardo.

Yet thatdoesn’t mean Gibraltar wants to discourage day trippers from visiting, stresses Costa. “Day trippers are very welcome indeed to our shores and they do provide very important economic activity. But what we’d prefer for Gibraltar in addition are weekenders’ breaks.” Not that these aren’t happening already, but the inhabitants would clearly like to see more. Guerrero concedes that the typical image of a visit to the Rock is of a trip that lasts a couple of hours – a bit of shopping, see the apes, and out. “Whereas in the past people might have come for a day to shop, what we’re aiming to do, once they’re here,is to entice themto stay longer and to visit again,” Costa explains. “We’re continuing to promote Gibraltar internationally, through trade fairs or meetings one to one with cruise-line executives, airline executives, tour operators in the UK and so on, but there has been less work in the past on converting the day tripper into a tourist.”

Naturally they’re biased, but the minister and the chief executive believe there is much more to see than many people realise when they visit, if only they stay. The heritage and the culture are notable, and a lot has been achieved to promote them. The current government campaigned hard on event-led tourism as a way of encouraging visits to the Rock. In office, the government has already rolled out an impressive array of attractive events, such asthe Rock’s very first international literary festival. The idea is to get people visiting and staying when there is no sun – bad weather is not as frequent in Gibraltar as it is in the UK, but there are colder months. There is also a difficulty in selling the Rock as a sun destination; the weather is fine but the beaches are small and, reasonably enough, the localsdescend on them and fill them up when they get the chance. “Of course there’s space for tourists, but if 3,000 of them descended on our beaches one day it would be quite the task to accommodate all of them,” Costa says.

The current administration has continued its predecessor’s work in developing infrastructure for overnighters. A leisure development called Ocean Village is now up and running. This includes bars, restaurants and nightclubs, as does the nearby Casemates, a square at the end of the main street. “There’s a lively nightlife to complement the heritage and the history, so we’re actively promoting Gibraltar also asa modern, vibrant city,” says Costa.

Another area in which the jurisdiction is developing is extension of the classic tour. There are more of them but more importantly they have different themes. “There’s your standard Rock tour,” says Guerrero, “but there are other sights. There’s very beautiful architecture; you’re tempted to look at eye level and see the shops when you walk down the main street but you miss a lot if you don’t look up.”

Ironically for a place that has been under UK jurisdiction for 300 years, the tourism people are now starting to market the territory as “undiscovered”. Guerrero says that when the government hosts someone, ifthey spend the night, they end up enjoying it more than they had expected and agreeing it’s a great destination.

“You mustn’t ignore our unique geographical location,” he adds. “There aren't many places where you can stand on a 1,396ft peak and look out at three countries spanning two continents.” You can of course see Spain, but on a clear day you can make out the coast of Africa as well. People wanting to explore the African continentfurther will find it’s a ferry ride away.

If it all sounds a little too convenient to be true, this could be right,for the moment. Costa concedes that, as well as marketing the Rock, which has many benefits, there is a need to improve connectivity, infrastructure and links with other territories. “We are working daily on sustainable connectivity to Spain,” he says. “Unfortunately the two airlines, Iberia and British Airways, had aircraft that were just too big, so they were only ever half full. Had they had smaller aircraft they would have been full, but because they used the Airbus A320 and A319 and there were two operators it just wasn’t sustainable.” The timing of flights wasn’t right either, he suggests: “It should have been a huge success story for Gibraltar but it wasn’t properly analysed.”

The government now believes it has worked out the right formula for aircraft size and times of day for travel, but as the earlier experiment failed it has been difficult to persuade a new operator to come in. Sustainable connectivity to Spain remains a goal even as conflict on the border flares up every few years, as does the connection to Morocco. “If people can fly from Madrid or Morocco to Gibraltar, they will come either as tourists or as business travellers. There was an occasion recently when I flew from London to Gibraltar and the front of the bus, the business class seats, were up to row 12.” Replicating this connectivity to Madrid would link another major hub to Gib, Costa believes. “Any properly sized aircraft at the right time would be full.” Conversations with operators in Spain and Morocco are ongoing.

There has been legislative change under the current administration that willhelp. Around Easter this year Moroccans, Russians, Chinese and Mongolians were allowed to apply for tourist visas to allow them to visit Gibraltar for up to 21 days. A thousand two hundredhad visited by September. These were Costa’s idea of touristsin the usualsense:people who come to stay overnightrather than just have a snapshot taken with a Barbary ape (not that he wants people to miss this experience, either). There are affluent people in Morocco who want to spend money on luxury European goods, he observes, and Gibraltar wants to welcome them. There is another advantage to marketing to the Moroccans, of course: Gibraltar doesn’t get involved in territorial disputes with Morocco, whereas relations with Spain tell a different story.

The willingness of the effort to get people into the country is beyond doubt; if they all turn up, though, the facilities for them (Ocean City and Casemates notwithstanding) will need reconsidering. There are enough hotels for the moment, Costa says. “The statistics can give a very misleading impression. I go to one hotel terrace every weekend,a sort of second officefor work, away from emails and correspondence, and it’s always full. When you look at the statistics, though, it doesn’t seem to be doing as well.” This is because the stats compiled offer an average figure foroccupancyacrossthe entire hotel sector,thoughindividual establishments can do spectacularly well.

There will be a need for increased capacity and it ison the way. A new luxury floating hotel, the Sunborn, is opening early next year at Ocean Village with 189 rooms; these are VVIP class, five-star-plus luxury, aiming at a particularly affluent market. The Tourist Board is also in discussion with an operator to buildadditional premises; it can’t name the operator at the moment but you get the feeling there’s another hotel in the offing. “We are working to have another four-star business hotel,” Costa confirms.

It is clear that the Rock will needmore beds if the push for more overnight tourists is to be a success. It will also need to give some thought to the environment – 3,000 people traipsing overthe Rock from a ship is one thing; amplify that whenthey start to stay overnight, overlap with each other and get augmented by Moroccans, Russians and others, and you could have a serious problem. Costa has been working with Dr John Cortes, the minister for the environment, on a sustainable transport plan for the Upper Rock. “Right now taxis and tour operators take tourists whoarrive by sea, air or land to the Upper Rock and at times there is congestion,” Costasays. “We’re looking at how we can decongest the area, first for reasons that are environmental, but also because we want tourists who go there always to have a great time.”

Add the possible queue to get in at the border, depending on relations with Spain at the time, and the disincentives to return could be substantial. Governmentministers are working with the various interest groups in the territory to arrive at a mutually acceptable solution.

None of this should be taken to mean that day trippers will be neglected. Costa, Guerrero and their team want to expand, not replace, the existing tourist industry. If they succeed,there is a good chance that the presentunderpinnings will become unsustainable quite quickly. Clearly the administration hopes to address infrastructure before it becomes an obstacle. There are many balls in the air at the moment; if they all come down in the right order, and soon, the results should be very positive.

This is a corrected version published on 9th December 2013. It originally appeared in the New Statesman magazine within a 16 page special report ‘Rock Solid Investment. Gibraltar: Tourism, Property, Travel’ on the 21st November 2013.

Photo: Getty
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Gibraltar - impact of Brexit

Last week our editor took a general overview of some of the scenarios for Gibraltar if Britain were to leave the Euro. This week, as the atmosphere in the British Conservative Party becomes ever more toxic, Michael Castiel, partner at Hassans lawyers on the Rock, goes into more detail (this piece written before the Iain Duncan Smith resignation and subsequent arguments happened).

However unlikely it may prove, the prospect of Britain's withdrawal from the EU sends shivers through Gibraltar's financial services, gaming and tourism industries, which are at the core of Gibraltar’s economy. For, if Britain leaves the EU, Gibraltar goes too, and, should Brexit occur, it is Gibraltar’s relationship with the UK that as in the past, largely will shape Gibraltar's future.

Gibraltar joined the European Union in 1973 as part of the UK. While rights to freedom of services across borders of EU member states apply between Gibraltar and the rest of the EU, because Gibraltar is not a separate member state (and is in fact part of the UK Member State) those rights do not apply between Gibraltar and the UK. Instead a bilateral agreement, formalised almost two decades ago, gives Gibraltar's financial service companies the equivalent EU passporting rights into the UK. Accordingly and pursuant to such agreement, where EU rights in banking, insurance and other financial services are concerned, the UK treats Gibraltar as if it is a separate member state.

This reliance on the special relationship with the UK is recognised by both the Government and the Opposition in Gibraltar, and when the territory (which in this instance as part of the UK electorate) goes to the polls on 23 June, the vote to remain in the EU is likely to be overwhelming. This may have symbolic significance but realistically seems unlikely to influence the outcome. In actual terms, although some non-EU jurisdictions use Gibraltar and its EU passporting rights as a stepping stone into Europe, almost 80% of Gibraltar’s business dealings are with the UK.

But whether or not Britain maintains the 'special relationship' with Gibraltar, if Brexit becomes a reality, other factors will come into play, with the ever-present Spanish Government’s historic sovereignty claim over Gibraltar topping the list.

Recently Spain's caretaker Foreign Minister Jose Maria Margallo went on record that if the UK voted to leave the EU he would immediately 'raise with the UK the question of Gibraltar.' If this was to come about it could take one or more of several different forms, ranging from a complete closure of the border between Spain and Gibraltar, demanding that Gibraltar passport-holders obtain costly visas to visit or transit Spain, imposing more stringent border controls, or a frontier toll on motorists driving into or out of Gibraltar. The latter idea was in fact floated by the Spanish Government three years ago, but dropped when the EU Commission indicated that any such toll would contravene EU law.

Here, again, imponderables come into play, for much will depend on which political parties will form the next Spanish government. A Spanish government headed by the right wing PP party is likely to take a less accommodating attitude towards Gibraltar (the Foreign Minister having recently indicated that in case of Brexit the Spanish Government may opportunistically push once again for a joint sovereignty deal with the UK over Gibraltar) whereas a left of centre coalition will likely adopt a more pragmatic and cooperative relationship with Gibraltar in the event of EU exit.

The most significant changes to Gibraltar's post-Brexit operation as an international finance centre are likely to be in the sphere of tax, and while Gibraltar has always met its obligations in relation to the relevant EU rules and Directives, it has also been slightly uncomfortable with aspects of the EU's moves towards harmonisation of corporate taxes across member states.

Although it was formed as a free market alliance, since its inception fiscal matters have been at the root of the EU, but Gibraltar's 'special relationship' with Britain has allowed considerable latitude in relation to what taxes it imposes or those it doesn't. However, as is the case with other member states, Gibraltar has increasingly found in recent years its fiscal sovereignty eroded and its latitude on tax matters severely curtailed.

As in Britain, Gibraltar has benefitted from several EU Directives introduced to harmonise and support the freedom of establishment, particularly the Parent-Subsidiary Directive which prohibits withholding taxes on cross-border intra-group interest dividend and royalty payments made within the EU.

As a stepping stone for foreign direct investment, should Brexit come about EU subsidiaries could no longer rely on these Directives to allow tax-free dividend or interest payments to their holding companies based in Gibraltar. In the case of the UK, bilateral double tax treaties will no doubt mitigate the impact of the non-application of any tax related Directives. Gibraltar, however, is not currently a party to any bilateral double tax treaties. Accordingly, Gibraltar would either have to seek from the UK the extension of all or some of the UK’s bilateral tax treaties to Gibraltar (subject of course to the agreement by the relevant counterparties) or it would need to negotiate its own network of bilateral double tax treaties with a whole series of EU and non EU Member States. To say the least, neither of these options would be straightforward to implement at short notice and would need the wholehearted support of the British Government

Whilst Gibraltar’s economy is likely to be adversely affected should Brexit occur, there may be some potential benefits. An EU exit would result in fewer regulations and possibly may provide Gibraltar with greater exposure to emerging economies.

From a tax perspective, an EU exit would probably enable Gibraltar to introduce tax rules and incentives that are contrary to EU tax laws and would provide the Gibraltar Government more freedom to adopt competitive tax regimes that may be considered contrary to EU state aid rules. How possible or effective any such strategy would be is doubtful given the OECD driven anti-tax avoidance climate affecting all reputable jurisdictions whether within or outside the EU.

In this as well as other possible change much will hinge on any post-Brexit relationship with the UK - an issue which the Gibraltar Government addressed recently in a paper sent to Westminster's Foreign Affairs Committee. It stressed not only that 'EU membership has been an important factor in the development of Gibraltar’s economy' but also the importance of 'clarity as to the rights the British Government will protect and defend for Gibraltar in the context of its own negotiations.'