Andorra aims for a different peak

Despite being one of the world’s smallest countries, Andorra has a lot to offer. Its 468 square kilometres of land surface, all at an average altitude of 1996 metres, make the country and its economy stand out.

Situated in the Pyrenees mountain range between France and Spain, about 64% of the country comprises woodlands and high mountain meadows, with 20% natural scree and rocky areas, and only 5% of the land forming urban space.

But the country’s mountainous character makes it a prime tourist destination. Some 8 million people visit Andorra every year – the majority of which are one-day visitors from neighbouring France and Spain. In the winter, Andorra attracts alpine skiers with its 303 kilometres of skiable slopes across 3075 hectares, plus 15 kilometres of nordic and cross-country skiing tracks.

An uphill struggle?

Tourism is exceptionally important to Andorra, making up the majority of the country’s revenue source. But business is highly seasonal. Most revenue is produced in the winter months, when tourists from neighbouring countries, as well as the UK, Portugal, Russia, the Benelux countries and the Nordics visit, mainly to ski.

“Seventy percent of the tourists that come to Andorra during the winter season come to ski,” says Alfonso Torreño, chief executive of Granvalira-Nevasa, the largest ski resort in the Pyrenees. “We create 2500 direct jobs, so we can say that ski tourism is one of the most important economic motors in Andorra.”

Those who do not ski are traditionally encouraged to visit Andorra’s 2436 shops and 364 cafes and restaurants, as low indirect taxes compared with neighbouring countries draw in visitors (general tax rate charged on consumption is 4.5%).  

Slippery slope?

But Andorra’s model of winter and commerce-focused tourism has faced some headwinds since the financial crisis. As visitors from economically troubled Spain fell away and goods elsewhere became increasingly competitively priced due to internet sales, Andorra – as was the case with much of Europe – went into recession. Real gross domestic product (GDP) fell from 2008, when there was a steep 7% economic contraction, until Andorra returned to growth with a marginal 0.4% increase in 2013.

A reliance on commerce, particularly a focus on the winter months, had to be rethought. The government of Antoni Martí Petit, which took office in 2011, doubled its tourism budget to improve the situation.

“We have a very big hotel and tourist apartments sector, with more than 44,000 beds,” says minister of tourism and commerce Francesc Camp. “The occupation in the winter months is OK, at more or less 80%. In the summer months, we have about 50% to 60% of occupation but in spring and autumn it is less than 50%. We are trying to communicate Andorra’s virtues throughout the year.”

The increased budget available allows more work with tour operators in the UK, Portugal and the Benelux countries, he adds, while funds are also invested in big sporting events in both winter and summer, as well as cultural events.

Another strategic decision to transform Andorra’s tourism and economy was to move from focusing on quantity to quality. Josep Areny, president at Grup Calbó, one of the country’s oldest hotelier groups, is pioneering this philosophy. “We are only a small country, we don’t have the infrastructure to accommodate infinite numbers of people,” he says. “Now the aim is to provide a higher degree of quality and attract different types of tourists.”

Mr Areny’s family business owns and operates one five-star and two four-star hotels, which aim to attract visitors with some of the country’s best culinary experiences thanks to two Michelin star chefs and summer attractions such as the country’s highest golf green within the Grandvalira ski domain.

Mr Areny says most tourists still arrive in winter, but adds that efforts towards improving occupation in other months are helping, which is in part down to tourists visiting to watch sporting and other events. 

Sporting chance

Two of the world's biggest road cycle races, the Tour de France and Spain's equivalent, La Vuelta, are now regular visitors to Andorra. The Tour cycled through Andorra’s streets in 2016, enticing visitors to stay for three days as the country hosted not just the finish and start of stages nine and 10 but included a rest day for British cyclist Chris Froome and others. La Vuelta last stopped in Andorra in 2015 but this year the territory will again host the finish and start of two stages.

In the winter season, World Cup ski races also attract spectators, such as the ladies’ Super G and combination races in February 2016. The World Cup finals for both men and women will be held in Andorra in 2019, at Grandvalira’s Soldeu and El Tarter ski resorts. Since 2015, Andorra’s Vallnord resort hosts one leg of the Freeride World Tour, where the world’s best off-piste skiers and snowboarders compete every year.

“Andorra is one of the most attractive ski destinations worldwide,” says Mr Torreño, who adds that Grandvalira alone receives about 1.8 million skiers a year, making it the 16th most frequented such resort in the world. “We have invested a lot in events, marketing and in improving our infrastructure to create one of the most modern ski resorts in Europe.”

To boost the potential of Andorra as a spring, summer and autumn destination, the country is pushing its summer sporting activities through a smartphone app launched in July 2013 by the tourism office, which offers interactive routes and maps for hiking, climbing, cycling and other pursuits.

The government has also introduced a unique staging of Cirque du Soleil, which performs some 22 shows in July, attracting more than 100,000 spectators. About half the tickets are free, bringing in additional visitors.

And Andorra has more in store, according to tourism minister Mr Camp. “In the low season, we are especially promoting our shopping sector, spa and wellness services and the Pyrenean gastronomy,” he says. He adds that the government is seeking to invest in a new multi-functional venue, which will enable Andorra to host more shows, concerts and festivals, and is also launching a tender for a new casino in the coming months. 

Diversifying the economy

Yet with much work being done to improve tourism, other parts of the Andorran economy also need reviving.

While Andorra is in the process of overcoming a “very strong economic crisis”, according to Víctor Pou, a professor of economics at IESE Business School, at the University of Navarra in northern Spain, the economic outlook for the country is “very optimistic” thanks to its “economic openness and modernisation process”.

Since returning to growth in 2013, real GDP grew 2.3% in 2014 and 0.8% in 2015. The dip in 2015 was related to alleged money laundering at Banca Privada d’Andorra in 2015, the then third largest Andorran bank by assets – a case that was resolved in 2015. Contributing some 20% to GDP, the country’s five banks, largely focusing on private banking, also have a significant impact on the economy.

According to Mr Pou, the economy needs to diversify as it is “still too dependent on the three classic activities of the principality: tourism, trade and banking”.

A foreign investment law introduced by the government in 2011, which liberalised foreign investments in the country, set the framework to attract more investors to areas such as advanced services and industry (higher education, advanced medicine and so on) as well as technology. However, Andorra yet has to reap the rewards from this.

One significant difficulty for tourists and business people alike is geographical access. The nearest airports are Barcelona, 197 kilometres south of Andorra, and Toulouse, 185 kilometres north, both of which require a transfer of about three hours by coach.

The government is working on building a heliport, which would reduce transfer time to 15 to 20 minutes. “It was not easy to find the right land for this but we have now done so,” says Mr Camp. “This year we hope to start the construction so in the next two to three years it will be easier to arrive by air.”

More convenient and inclusive – as helicopter transfer will be much more expensive – would be an airport closer to Andorra. Owned by the government of Catalonia, Andorra–La Seu d'Urgell Airport is a unique operative airport 20 kilometres south of Andorra.

“We are working with the Spanish government and the EU on using this airport,” says Mr Camp. Should it be possible to attract commercial airlines, the aeroplanes would likely have a maximum capacity of 50 passengers, he says, adding that this would mean a mere two hours’ flight time from major European capitals such as London, Paris, Madrid, Lisbon and Brussels. Still, as the airport is not on Andorran soil, achieving this could be a difficult undertaking. 

A brand for Andorra

Andorra’s economy has made a giant transformational step from an agricultural community only 60 years ago, to a major commercial and tourist destination today. While the global financial crisis threw up challenges to the country’s economic model, the local business community will be eagerly eyeing its future economic strategy and international positioning. These will hinge on Andorra’s relationship with the EU, its ability to attract further foreign capital and the internationalisation of its businesses.

But there is another, softer aspect which would make a difference: greater awareness of Andorra. To achieve that, the Confederació Empresarial Andorrana (CEA), the country’s business confederation, is working on a branding for the country “to redefine, strengthen and to begin promoting Andorra as a country both at home and abroad”, according to CEA president Xavier Altimir.

“We are very unknown as a country,” he says. “We always talk about the triangle of about 1000 kilometres surrounding Andorra – here we are known. But we need to be known further [away] and need to become a country to which people come to do business and for that we need to define Andorra in a way that resonates across countries and sectors.”

The CEA’s Marca Andorra working group is compiling the results of a consultation, and seeking to redefine the national brand in the coming months. It hopes this will go a long way to making Andorra known for being more than just a small country between France and Spain.