Madrid is ready to party again.
A strengthening economy and a pickup in consumer spending are energizing nightlife in the Spanish capital after a perfect storm of record unemployment, tax increases and a smoking ban put more than 400 venues out of business since 2008.
As Greece flirts with a euro exit yet again and Italy stumbles through another recession, Spain is putting the bad times behind with six straight quarters of growth. Even as it deals with the aftermath of the slump and the threat of political instability from regional and national elections this year, Madrid’s entertainment industry is betting the recovery is here to stay.
One sign of changing fortunes is Opium Madrid, a 1,000-capacity venue with a price tag of more than 2 million euros ($2.2 million), the city’s biggest club opening in six years. Jumping on the party bandwagon, five other super clubs costing as much as 3 million euros are set to debut this year, according to business association Noche Madrid.
“Madrid is a great place to be,” said Javier Bordas, owner of Opium, which he plans to open seven days a week. “You’ve got the football players, celebrities, and people love to party. We’re optimistic.”
That outlook for the nightlife industry is being helped by Spain’s performance over the past year. Initially export-driven, the recovery is beginning to be felt domestically as falling prices boost real incomes. The economy grew at its fastest pace in seven years in the fourth quarter of 2014, capping its first full-year expansion since 2007.
Economic Surge
Spanish consumer prices plunged an annual 1.5 percent in January, the most since Bloomberg began collecting the data in 1997. Along with cheaper energy, that helped push retail sales up the most in more than a decade in December. Household confidence has risen to pre-crisis levels, reaching a record in January, according to Madrid-based pollster CIS.
With jobless claims falling, Spain’s economy will outperform the three largest euro nations this year, according to the European Commission. It forecasts expansion of 2.3 percent in 2015 and 2.5 percent in 2016, exceeding the euro-area average of 1.3 percent and 1.9 percent. Spanish consumer prices will probably fall 1 percent this year.
“The economy is growing faster than expected on the back of strong domestic demand, helped by low inflation, labor market conditions and a pick-up in real wages,” said Antonio Garcia-Pascual, chief euro-area economist at Barclays Plc in London. He expects private consumption and investment to be the main drivers of growth this year.
‘Spending More’
Under Prime Minister Mariano Rajoy, the conservative People’s Party government has introduced a series of tax breaks to incentivize permanent hiring, including a 100 euro-a-month flat rate for companies taking on new employees on open-ended contracts or turning temporary workers into regular staff.
For 28-year-old Marta Gutierrez, who works in marketing, having a job makes all the difference when it comes to spending.
“I have a permanent job, before this I worked as an intern,” she said as she enjoyed a drink outside Terraza de la Reina, a terrace bar in central Madrid. “I used to do pre-drinks at home and skip dinner on weekdays. Now I’m going out a lot more and spending more money on restaurants and having drinks with friends.”
Slump Legacy
The economy must still contend with the legacy of the nation’s real-estate crash and recession as it heads into an electoral marathon to choose governments at local and regional level before the general election due around the end of the year. Podemos, the anti-establishment party pledging to restructure $1.1 trillion of Spanish public debt, has widened its lead over the People’s Party, according to a poll published on Feb. 4.
While Spanish unemployment has dropped from a record high of 27 percent and surveys point to an improving labor market, the jobless rate remains the highest in the euro area after Greece, where Alexis Tsipras won elections last month on a similar platform.
More than half of those below the age of 25 are out of work as young Spaniards struggle to secure permanent contracts in a two-tier labor market where older workers benefit from more pay and better working conditions.
La Movida
Club owners are following the money by tailoring their offers to also suit the interests of those Spaniards who learned to party during La Movida, the cultural revolution in music, arts and entertainment that blossomed after the death of general Francisco Franco in 1975.
“With the crisis, nightlife in Madrid has changed,” said Fernando Nicolas, co-owner of restaurants Marieta and Pipa & Co. “You have to appeal to a wider range of customers, aged 18 to 60, and transition from dinner to drinks. You don’t want to be just a club.”
While prospects for barkeepers and club owners have improved with consumer sentiment and the economy, the recovery of Madrid’s nightlife still has some way to go.
Taxes on the industry nearly tripled to 21 percent at the height of the crisis in 2012, leaving thousands of small bars and clubs in jeopardy. Between 2008 and 2011, consumption of alcoholic beverages inside clubs and bars fell 30 percent, according to Noche Madrid.
“It’s total Darwinism, only the strongest have survived the crisis,” said Dani Marin, co-owner of Costello Club, a live-music bar near Gran Via in downtown Madrid. “The mood seems to have changed, but that hasn’t translated into profits so far. We’ll have to wait and see.”
Source: Bloomberg