Spain's hoteliers enjoyed one of their best summers in years, an industry body has said, adding that 2007 prices and profitability should be even higher in the world's second biggest tourist destination

Jose Guillermo Diaz Montanes, president of the Spanish Hotel and Lodgings Confederation (CEHAT), said that because prices are set a year in advance, hoteliers who had just enjoyed a strong 2006 would be bullish in setting prices for 2007.

“In 2007 the increase in prices will probably be higher than in 2006 and profitability is going to get better,” he said. “We’ve had an excellent season but this is no guarantee for next year. We have to continue working hard,” he said, adding that the Balearic and Canary Islands, Catalonia and the region around Valencia had all experienced a great season. Spanish hotels had around 2.3 percent more beds this year than last but demand was growing at a faster rate, he said.

Murcia and the historic cities of Cuenca and Salamanca were three of the few areas to experience a worse year than 2005. CEHAT’s report on summer 2006 said 57 percent of hoteliers enjoyed a price rise of between 2 and 5 percent, while another 6 percent put up their prices by more than 5 percent. Spanish inflation was running at 4 percent in July and 3.7 percent in August. Some 79 percent of hotels were fuller than in 2005, and only 2 percent were emptier.

The figures reflect positive comments from hotel groups in recent weeks, and an end to five years of price wars in the Spanish tourist market, which is second only to France’s. A 13 percent increase in low-cost flights to Spain in 2006, early bookings and greater insecurity in rival markets like Turkey and Egypt all helped Spain, the report said. However the challenge of the illegal market remains huge.

Diaz Montanes said an estimated 40 percent of tourists organised holidays directly with the supplier who did not register the booking or pay taxes on it, costing the exchequer an estimated €110m to €160m a year. In August the Tourism Ministry said Spain expects to receive between 3.5 and 4 percent more foreign tourists this year. In the first seven months of 2006 it welcomed 33.3 million foreign tourists, a 5.3 percent increase on the same period last year.