Over the past 15 years, the Balearic Islands have generated their income according to a simple principle: growth through volume and premiumisation. Driven by low-cost airlines, new visitor records were constantly being set – most recently, over 14 million guests travelled to the islands each year. The money flowed primarily into the coffers of the catering and hotel sectors. To generate more revenue per capita, investors converted standard hotels into 4- and 5-star oases. At the same time, the property market boomed. Foreign capital bought fincas and flats as speculative investments or holiday accommodation. The result was record revenue for the state from the tourism tax – also known as the ‘Ecotasa’ – and land transfer taxes, whilst at the same time locals were being squeezed out of the housing market.

The paradox of the protests: the target is one’s own state

The current mass demonstrations on the streets of Palma are directed against ‘overtourism’. At their core, they are a powerful signal from the public calling for long-overdue structural change. The residents are demanding a reduction in tourism and, in doing so, are urging politicians to pursue bold, future-proof economic alternatives. The protests are a mandate for the government to place the islands’ prosperity on a broader, crisis-proof footing – as the starting point for a joint effort to transform the Balearic Islands from a purely holiday destination into a modern, diversified living and economic space of the 21st century. Sectors outside tourism, such as IT, research or the green industry, can now be supported through tax incentives or structural measures.

US Direct Flights as a Catalyst

The launch of direct flights between the US – specifically from New York to Mallorca – has attracted a new clientele since 2022. Hotels and property prices have adjusted to the influx of affluent guests. From an environmental and social perspective, the summer rush has since proved almost impossible to manage. Mallorca has reached its breaking point. To prevent collapse, the Balearic Islands can learn from destinations that have successfully diversified their appeal.

Option A: The ‘Iceland-Silicon Valley’ model

The strategy: to actively attract digital companies, fintechs, iGaming and crypto firms by providing legal certainty and tax incentives.

Mallorca can learn from Malta how a geographically isolated island nation can build new, year-round industries through radical digitalisation and smart legislation. Malta faced a similar challenge: it was heavily dependent on tourism. Today, the country generates a significant proportion of its economic output through digital services, technology and international companies.

Four Malta-inspired strategies for Mallorca

1. Introduce tax incentives for tech companies

• Malta attracts international companies through what is known as the ‘full imputation system’. Whilst the standard corporation tax rate stands at 35 per cent, foreign shareholders can reduce the effective tax rate to as low as 5 per cent through tax refunds.

• As Mallorca is part of Spain, it cannot set its own tax rates entirely independently. However, the Balearic Islands Government can make full use of existing Spanish legislation for start-ups and, within the framework of EU rules for island regions, position the Balearic Islands as a special economic zone offering maximum tax incentives.

2. Building niche ecosystems

• The Malta Gaming Authority (MGA) was one of the first regulatory bodies in the world to establish clear, robust regulations for online gambling. This attracted hundreds of companies, which not only opened offices but also brought highly skilled workers – such as IT developers, lawyers and data analysts – to the country. Similar regulatory frameworks for blockchain and fintech companies followed later.

• Mallorca could play a pioneering role in another promising niche: renewable maritime tech (Blue Tech) and PropTech (property technology). A specialised Balearic regulatory body could attract start-ups from around the world wishing to test environmental technologies for the maritime sector in the Mediterranean.

3. Focus on ‘digital nomads’

• Malta was an early adopter of the Nomad Residence Permit. In addition, the entire island has been equipped with comprehensive high-speed internet coverage (5G and fibre-optic). Malta is actively marketing itself as a year-round workplace for European employees.

• Mallorca has excellent transport links thanks to its airport, but lags behind in terms of digital infrastructure in the island’s interior. The goal for 2040 could be: combining co-living with tradition. With government support, unused land in the interior will be transformed into tech-focused co-working hubs. This will take the pressure off the coast and bring spending power to the villages – all year round.

4. Transformation of local service providers

• The arrival of tech companies in Malta has created a demand for highly specialised local services. Within just a few years, local lawyers, tax advisers and agencies have developed from generalists into international experts in digital law and tech compliance.

• The approximately 50 per cent of Mallorcans who currently work in administration, law and local tourism services could be retrained in a targeted manner. By 2040, a lawyer in Mallorca will no longer be primarily involved in the sale of holiday homes, but will instead be advising international tech start-up founders on EU-wide expansion.

Option B: The ‘Blue Economy & Marine Hub’ model, modelled on Hawaii

The strategy: to capitalise on the geographical location to conduct research into climate change, clean energy and marine biotechnology.

Mallorca can learn from Hawaii how a world-famous island destination has transformed its geographical isolation from an economic disadvantage into a global competitive advantage. Hawaii faced the same challenge: a reliance on mass tourism and vulnerability to global crises. The response of this US state in the Pacific was the targeted development of an innovation-driven ‘Blue & Green Economy’.

Hawaiian strategies for Mallorca

1. Using the sea as a laboratory with marine biotechnology and blue tech

• Through the Natural Energy Laboratory of Hawaii Authority (NELHA), the island is harnessing deep-sea water for groundbreaking innovations. This is giving rise to thriving industries in sustainable aquaculture, marine biotechnology (e.g. algae research for biofuels) and pharmaceutical products derived from the ocean.

• The Mediterranean Sea surrounding the Balearic Islands offers the perfect testing ground. By 2040, Mallorca could become the leading centre for research into and the protection of marine ecosystems in the Mediterranean region. Rather than viewing the sea merely as a picture-postcard backdrop for holidaymakers, research clusters are emerging that develop and export globally technologies for CO₂ storage in the sea, for the conservation of Posidonia seagrass meadows, and for microplastic-free aquaculture.

2. Radical decarbonisation of the maritime sector through the Eco-Maritime Hub

• Hawaii has legislated a commitment to using 100 per cent clean energy across the entire transport and energy sectors by 2045. This is forcing the maritime industry to make massive investments in electric and hydrogen propulsion systems.

• Mallorca is already the undisputed shipyard and yachting hub of the Mediterranean. This existing infrastructure will undergo a radical transformation by 2040. The island is introducing strict environmental regulations for ports, but in return offers state-of-the-art infrastructure for electric yachts and hydrogen propulsion systems. Local shipyards will no longer merely carry out repairs, but will become pioneers in eco-friendly shipbuilding and refitting. This will generate well-paid, year-round jobs in engineering and skilled trades.

3. Establish the principle of ‘regenerative tourism’

• Hawaii coined the term ‘Malama Hawaii’ – an invitation to travellers to give something back to the island. Tourists play an active part in planting trees or cleaning up reefs. At the same time, a significant proportion of tourism levies goes directly towards state-funded environmental and agricultural projects.

• The Balearic Islands are transforming the existing tourism tax (Ecotasa) into a genuine ‘regeneration fund’ by 2040. Every summer visitor will directly and transparently fund specific projects: the reforestation of the Tramuntana mountains, water desalination using solar energy, or subsidies for local farmers. Tourists will go from being mere consumers to active supporters of ecological change.

4. Cleantech self-sufficiency in water and energy

• Due to its isolated location, Hawaii is investing heavily in decentralised energy storage, geothermal energy and smart water cycles in order to become independent of expensive oil imports from the mainland.

• Mallorca suffers from acute water shortages in the summer and imports fossil fuels. By 2040, the island could become a real-world testing ground for island self-sufficiency. Expanding green hydrogen production and innovative, solar-powered seawater desalination plants will make the Balearic Islands more self-sufficient. The expertise developed for this purpose is a valuable export for other coastal regions around the world threatened by drought.

Option C: The ‘Smart Circular Economy Island’ model, as seen in Iceland and Singapore

The strategy: self-sufficiency in critical infrastructure relating to energy, water and waste.

Mallorca can learn from Iceland and Singapore how an island region can transform existential resource crises into a globally exportable model of success through a consistent circular economy and technological self-sufficiency. Both countries faced massive geographical constraints: Iceland, isolated in the North Atlantic; Singapore, an extremely densely populated city-state with no resources of its own. Both prove that keeping waste, water and energy within a circular system creates the world’s most crisis-resilient economy.

Strategies for Mallorca 1. ‘Waste-to-Wealth’ – waste as a source of raw materials, modelled on Singapore

• As Singapore has no space for landfill sites, almost all household waste is incinerated in state-of-the-art facilities to generate electricity. The ash is used for land reclamation. Furthermore, the country recycles electronic and industrial waste at one of the highest rates in the world.

• In summer, Mallorca suffers from crowds of tourists. By 2040, the island will have made the transition from waste disposal to resource recovery. The existing Son Reus waste-to-energy plant will be expanded into a circular energy and raw materials centre. A binding ‘zero-waste’ law will require the hotel industry to convert 100 per cent of organic waste into biogas for use in the island-wide public transport system. Plastic and packaging waste will be upcycled on site into new, durable building materials for the local property sector.

2. The closed-loop water system – ‘NEWater’, modelled on the Singapore system

• Historically, Singapore has been dependent on water imports from Malaysia. With its NEWater technology, the government has developed a system that transforms wastewater into ultra-pure drinking water using advanced membrane and UV technology. Today, this recycled water meets a large proportion of the country’s needs.

• Falling groundwater levels are Mallorca’s greatest threat. The island will have implemented a closed-loop system by 2040. Not a single drop of treated wastewater may be discharged into the sea without being reused. It will be purified using state-of-the-art filtration systems and channelled directly into agriculture for smart drip irrigation or to replenish underground aquifers. Hotels will be legally required to operate their own greywater recycling systems for toilet flushing and garden irrigation.

3. Cleantech and geothermal symbiosis modelled on Iceland

• Iceland harnesses its volcanic activity to generate 100 per cent green energy. The key feature is the ‘Resource Park’ concept centred around the geothermal power stations: the waste heat and CO₂ from the power station are channelled directly to neighbouring high-tech greenhouses, fish farms and cosmetics companies. Nothing is wasted.

• Although Mallorca has no volcanoes, it does have an inexhaustible supply of solar energy and biomass. By 2040, integrated cleantech business parks could be established in the island’s interior, such as around Inca or Manacor. Large-scale photovoltaic plants will generate electricity and green hydrogen during the day. The waste heat produced in the process will be used directly for industrial drying processes, such as in the local almond and carob processing industries, or to power seawater desalination plants.

4. Agro-tech & vertical farming for food self-sufficiency

• Under its ‘30 by 30’ strategy, Singapore aims to produce a third of its own food by 2030 – using minimal space through vertical farming, hydroponics and robot-controlled greenhouses.

• Today, the Balearic Islands import over 80 per cent of their food from the mainland, whilst Mallorcan fields lie fallow. By 2040, the islands will be able to revitalise their agricultural sector through agro-tech. By combining traditional permaculture with modern, solar-powered greenhouses in the island’s interior, Mallorca will become a premium supplier of organic produce for the whole of Europe in winter and will be self-sufficient in supplying its own visitors in summer. The craft sector specialises in the installation and maintenance of these agricultural technologies.

Vision for the Balearic Islands 2040

The way forward is to “use the tourism infrastructure to diversify the economy”. Revenue from the remaining – controlled and scaled-back – tourism offerings could be channelled into developing the tech and environmental sectors. Vision 2040 does not view tourism as an adversary, but as a strategic partner in the process of change. The nearby Spanish city of Barcelona has been capping the number of summer visitors since 2026; it seems there is no way around this measure for the Balearic Islands either.

The latest European studies highlight where Europe’s economy is facing bottlenecks. Reports from the European Commission (EU Shortage Occupations Report) and the Eurofound research foundation show that over 80 per cent of European companies are suffering from a shortage of skilled workers in strategic sectors of the future. Thanks to their pleasant climate and excellent infrastructure, the Balearic Islands hold enormous appeal for European talent. The islands are well-suited as a location for addressing European challenges in three growth sectors.

1. ICT, AI and cyber security: The digital bottleneck

• According to the EU report on skills shortages, there is a shortage of IT developers, data analysts, AI specialists and cyber security experts in 25 European countries, including Germany, Ireland and the Netherlands.

• Highly qualified tech specialists are increasingly choosing where to live based on quality of life – talent attraction. If the Balearic Islands government establishes special tax zones as part of the new EU initiatives on tech sovereignty, tech conglomerates will be able to open European research and development centres there. The Balearic Islands are attracting the European tech elite to the islands.

2. Green Tech & Net-Zero Engineers: Towards the Energy Transition

• Reports from Eurofound show that the transition to a climate-neutral economy (Green Deal) is being held back by a shortage of engineers specialising in renewable energy, environmental technology and the circular economy.

• Islands are concentrated real-world laboratories. Europe needs test beds for decentralised energy systems, smart grids and carbon-neutral water technologies. As part of the EU’s Net-Zero Industry Academies programme, the Balearic Islands can position themselves as a pan-European testing and training hub for cleantech. Solutions developed here for solar power and water efficiency can be exported throughout the Mediterranean region, which is threatened by drought.

3. Marine biotechnology: the blue economy

• As part of the OceanEye initiative, the European Commission is driving forward research into the world’s oceans to strengthen Europe’s maritime sovereignty. There is a lack of centres that combine marine biology with economic applications in the pharmaceutical sector, algae-based biofuels and sustainable aquaculture.

• Mallorca boasts first-class maritime infrastructure, such as marinas and shipyards. Through the expansion of research facilities in collaboration with the University of the Balearic Islands (UIB), the island has the potential to become the southern hub for European marine research.