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Analysis

With Donostia 2016, San Sebastian rides the crest of the wave of new investments

The large provincial city in Spain’s autonomous community of the Basque Country is a cultural hot spot in 2016. Elected with Wroclaw, Poland, to be European Capital of Culture, San Sebastian is taking advantage of this opportunity to boost its image and improve its tourism installations. An 89 million euro budget was devoted to Donostia 2016, the Smart City project was launched at the same time. Fifteen or so hotels have risen out of the ground or are in the process of doing so on this occasion. The 2.5 million visitors benchmark should be reached in the agglomeration this year: a historic record. In addition to its history and gastronomic reputation, San Sebastian also relies on sports tourism and surf in particular to create its new image.

With some 200,000 inhabitants and 450,000 for the agglomeration, San Sebastian –Donostia in Basque– is trying to position itself alongside other important provincial cities such as Bilbao, its tourism rival, and Vitoria-Gasteiz, the political capital. Located deep in the Bay of Biscay and along the Concha Bay, the city has progressively grown from a fishing economy to one focused on tourism. Since the 19th century, Spanish high-society visitors made it into a reputable beach resort baptized the “Pearl of the Cantabrian Sea”. Its cultural heritage dates back to the Middle Ages, with the Buen Pastor Cathedral, the Basilica of Santa Maria del Coro, Miramar Palace… and it has been enriched more recently by cultural centers such as the Kursaal Palace, an exhibition and conference center that offers a geometric response to Bilbao’s Guggenheim Foundation.

Parte Vieja –Old Town– located at the foot of Monte Urgull, between the port and the estuary of the River Urumea, was built after the great fire of 1813. Its streets, lined with shops, restaurants, pintxos bars and gastronomy societies, are extremely lively year round. It is within this perimeter that two of the most important sites in the city are located: the Basilica of Santa María del Coro and the Church of San Vicente. The San Telmo museum, is another must-see located in a former convent, as is Plaza de la Constitución. This square is the site of most of the city’s festive events. Numbers above each window of the bright façades recall the former use of the balconies as boxes for watching bullfights.



Its location deep in the bay has long made it a “spot” that is very popular with the surfing community. It is a veritable industry that has developed around this sport with schools, stores, but also manufacturers of surfing equipment, accessories and clothing. According to Euken Sesé, director of the economic development agency Fomento San Sebastian, “we consider surf to be an interesting axis for economic growth and this is why we created a funding cluster to promote it: “Surf City Donostia”. Moreover, while it is a university town and economic center thanks to its commercial activities, San Sebastian does not neglect its cultural character. The city is involved in cinema, especially through its famous international film festival, and music with its summer jazz festival. Whence the idea launched in the 90s by the socialist mayor at the time, Odon Elorza, to suggest San Sebastian’s candidacy for European Capital of Culture. In 2011, the European Commission made its choice, and at the same time City Hall passed into the hands of the leader of the Independent party Juan Karlos Izagirre. For this project, however, the two fractions of Spain’s Left made a strategic alliance because they saw it as an opportunity to position the city well, despite reticence from some of the population, and to receive public funding. The project clearly announces the intention to use culture as a marketing tool: “The city’s commitment to the candidacy for European Capital of Culture is an excellent tool for creating a distinctive brand, combining quality, creativity and innovation. We want Donostia 2016 to be a cultural brand to position ourselves at the center of international cities. Culture is just the beginning of an ambitious strategy for urban development.”



In order to overcome the opposition among the living forces of the city, the municipality regularly refers to the success of the Olympic Games in 1992 that helped its Catalan rival, Barcelona, and to the transformation in 2004 that Lille underwent when it was European Capital of Culture, and, more recently, the economic benefits for Marseille after 2013, when the return for each euro invested was 7 euros. San Sebastian provided a budget of 89 million euros to finance shows, entertainment and new infrastructures. It was used to transform the former tobacco factory, Tabakalera, into a Center for Contemporary Culture, with a new 4-star hotel. Cultural programming was developed by the multidisciplinary team of Pablo Berástegui, the General Director of Donostia/San Sebastian 2016, who is investing a great deal in conviviality, the theme of peace and the commemoration of the greatest hours of Basque culture, with a wink to the 400th anniversary of the death of Shakespeare. The theme of the program centers on the notion of “Waves of Civic Energy” , with a focus on innovation, rupture, critical spirit, perseverance, courage, vital energy … ”. Behind the expected success of this temporary cultural event is the city’s motivation to intensively and durably grow its tourist arrivals and stimulate investments. Having surpassed the million night benchmark in 2013, San Sebastian forecasts 1.4 million nights by the end of 2016 at properties within the city itself and an ambitious 2.5 million nights in the entire agglomeration.

While Donostia 2016 naturally focuses on a cultural and innovative dimension, it finds a natural extension in another ambitious project to valorize the city. At the same time as the European Capital of Culture year, the city is also launching the Smart City Donostia project that will be implemented from 2016 to 2020. San Sebastian is already among Spain’s top 5 “smart cities” and the project aims to coordinate and intensify actions being taken by city and major economic players centering on six themes. Each theme offers exemplary development, ranging from responsible resources and waste management to optimization of production and supply of electricity, from the integration of new technologies to the development of clean transportation, and from efficient administrative management to participatory democracy. The goal of the province’s capital is to be the economic and political model of a well-managed city with an eye to the future. It was selected along with Bristol and Florence to act as a pilot program for this initiative on a European level; Essen in Germany, Lausanne in Switzerland and Nilüfer in Turkey will also be involved. The European Union will finance 25 million euros, 11 million of which will be dedicated to San Sebastian alone for initiating the different stages of the project. This will happen through investments in a new neighborhood along the Urumea, around three locations: Ametzagaina, Txomin and Polygone 27. These will illustrate a new, intelligent urban approach with the construction or rehabilitation of energy positive buildings, the development of ecological means of transportation, economic activities that look to the future with a City Lab and a renewable energy plant, paired with leisure installations in a riverside setting.



The promotion of a renewed and energized image of the city is intended to attract new, foreign tourism clientele from a higher economic status: “Donostia must be among the trendy new tourist destinations,” estimates Josu Ruiz, Councilor for economic development and tourism. Manu Narvaez, Director of Basquetour, translates this ambition even more pragmatically by pushing promotions in the emerging markets of China, Japan and Russia, and continuing efforts already made towards Americans. Spain’s Basque Country is targeting 4 million foreign visitors by 2020, and San Sebastian wants its share, especially on the congress and seminar markets as well as short stays for cultural purposes. Along with this ambition, the city’s hotel landscape is gradually changing, with new constructions as well as conversions of old buildings. A total of fourteen hotel projects have received authorization from the city, for more than 500 rooms and 1,200 beds for tourists. Five properties opened for the beginning of Donostia, while the others plan to take advantage of the new momentum of arrivals that will benefit the destination. The city’s hotel capacity will surpass 6,600 rooms after a 20% increase in its supply. For years San Sebastian had a stable supply, and then it was selected to be European Capital of Culture. The first to react was the local chain Zenit Hotels, which received authorization from the city to build an 80-room, 4* property in the new neighborhood of Morlans that it opened in 2015. The group was founded at the beginning of the 2000s by Javier Catalan and already has a portfolio of 22 hotels with three and four stars. The choice of San Sebastian corresponds to renewed favor for hospitality investment in Spain after a severe crisis. By promoting congress and seminar tourism, the city wants to eliminate the strong summer seasonality that discouraged investors and hotel operators. In the wake of Zenit Hotels, the group Miramon also opened a 73-room hotel-residence near the port, paired with the same volume of student residences in association with the Basque Cooking Center.



In addition to these new constructions, the group Sade was authorized to transform the original Plaza de Lasala building provided it would preserve its façade. A 71-room 4* is now under construction with a boutique spirit, and like the group’s other hotel, Astoria 7, its theme will center on cinema. In the city center, on Gipuzkoa square, a 19th century building will be converted into a hotel by Desarrolos Urbanos 2000, a real estate developer from Saragossa. The interior will be rebuilt, but the neoclassical Elizabethan façade is preserved. On the corner of this same square, the chairman of the local hotels-restaurants association, Mikel Ubarrechena, also wants to convert an old building into a two-star property. In the same neighborhood, the former convent of the Servants of Marie, in calle de San Martin, is being renovated by the chain Zenit into a hotel. Even more ambitious is the transformation of the former Monastery of San Bartolomé by the family-run group Catalonia Hotels of Barcelona, into a 122-room luxury property with a panoramic restaurant overlooking Concha Bay, with a convention and seminar space and a spa, for a global budget of 28 million euros. Opening scheduled in 2018.

Among the city’s other projects that shoud help it grow to 500 additional rooms is the conversion of the Villa Argialde into a 2-star, 34-room property with a second hotel associated with the restaurant Akelarre, that was authorized ten years ago. The chain Arrizul, already present in San Sebastian, is also preparing to open a new hotel in Ronda de Gros with 45 rooms to accommodate seminar goers attending work sessions at Kursaal Palace. In light of licenses accorded to smaller operators by the city, there are 14 new accommodations listings that are expected to complete the city’s capacities in the next two years, bringing more than 300 jobs.

If San Sebastian succeeds, in the years to come it will be a major new destination for the Basque Country and Spain’s Atlantic Coast. It may even be able to attract institutional investors and international hotel groups. So far, however, it has only attracted local entrepreneurs and Spanish operators.

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