BENALMADENA, Spain (Reuters) - Few Spaniards would sacrifice their annual summer vacation. But while Spain's beaches are still busy, shops and restaurants at its resorts are ominously quiet as the country's economic crisis envelops the tourism industry.
After 50 years of uninterrupted growth, Spain's overbuilt and relatively expensive resorts seem ill-placed to cope with a downturn, at a time of increasing competition from cheaper, less crowded destinations like Croatia and Turkey.
"In 48 years, I have never seen losses like this; tourism bosses I'm talking to have never suffered so much," said Domenec Biosca, president of Spain's Association of Tourism Directors and Experts.
He said that in many parts of the country, tourism is already in deep recession, as both Spaniards and foreigners travel less distance, stay less time and spend less money.
Spain's biggest hotel group, Sol Melia, reported profits fell 41 percent in the first half of the year, while those at business hotel group NH dropped 20 percent.
Revenues in the Canary and Balearic islands have fallen as much as 12 percent this year, Biosca estimated, predicting that such mature destinations will gradually decline in the face of foreign competition, despite lowering their prices.
Benalmadena, a resort near the southern city of Malaga, is one such mature destination.
Its wide strip of golden sand is shadowed by 1970s hotels, high-rise apartments and cul-de-sacs of whitewashed houses that stretch in a 50 km (30 mile) swathe of concrete from Malaga in the east to Marbella in the west.
While the town's beach was packed with sunbathers on a typical afternoon in late August, despite the explosion of a small bomb by Basque separatist group ETA on August 17, local businesses said sales were down.
British and Spanish tourists strolled past Hami Bhot's beachwear store, but only a few entered and fewer still spent any money. Takings have halved this summer, he said.
"I can perhaps survive another year but then I will have to close. Maybe I will go back to India; the economy is better there," said Bhot, who had dimmed the shop's lights to save money.
Tourism, which accounts for up to 15 percent of Spain's GDP and one in seven jobs, is suffering just as the economy needs it to take up the slack left by the rapidly contracting construction sector.
Until recently, towns on Spain's coasts relied on construction for most of their income and growth, but as foreign home buyers shun Spain, these towns can ill-afford to lose tourism revenues as well.
For the first time in a generation, Spaniards have had to slash spending on things like vacations as their incomes stagnate, prices rise and credit dries up. Unemployment, which leapt by over 100,000 in August to a 10-year high of 2.5 million, has become a major concern for the first time in years.
Spain was the world's No.2 tourist destination after France last year, with almost half of its 60 million foreign visitors coming from Britain and Germany.
But both countries are teetering on the edge of recession and the British are turning away from euro-denominated countries like Spain after the British pound's 15 percent slide against the euro in the last 12 months.
Britain's Thomas Cook, Europe's No.2 travel company, has cut destinations in euro-zone countries and boosted offerings to Egypt and Turkey, which received 25 and 15 percent more tourists last year, respectively.
Eight percent fewer foreigners arrived in Spain this July, according to Ramon Estalella, secretary general of hotel confederation CEHAT. But more worrying, he said, will be the impact of Britain's economic plight on bookings for later this year.
"Most package holidays in Britain were sold between January and April when there wasn't this feeling of recession as there is at the moment. I'm much more worried about bookings being made right now for the winter season," he said.
But it is economic pain in Spain, contending with the end of a 10-year-long property boom, that poses the greatest threat to the tourism sector, experts say.
Hotel occupancy in some northern areas favored by Spaniards fell a hefty 15 percentage points over the summer, said CEHAT's Estalella, compared with a 3 to 4 point drop across the country.
Establishments reported a respectable 85 percent occupancy rate in August, Estalella said, but to achieve that they resorted to price freezes and special offers that kept the average hotel bill increase to just 2 percent.
The crash of a plane carrying tourists from Madrid to the Canary Islands on August 20, which killed 154 people, was another potential damper on the sector.
In Benalmadena, hoteliers and apartment owners reported that, for the first time, many guests have cut their stay to one week from two. Others are coming just for a long weekend.
At his steakhouse on Benalmadena's beachfront, Raul Alvarez said he saw strong early season demand from northern Europeans before business fell away going into the high season.
"We were up 20 percent in April, May and June, but in July everything changed. Quite simply, the Spaniards did not arrive," he said gesturing towards empty tables.
Alvarez is missing clients like Rafa Nogales, his wife and young children, Benalmadena regulars who this year swapped eating out for meals in their rented apartment to save money.
Nogales said his family stayed one week rather than their usual two weeks because income from their own business, a restaurant in Madrid, has fallen 20 percent this year while food prices have soared.
After years of comfortable and predictable demand, Spanish officials say they now face major new challenges, including cheap competition from other destinations.
"We have no idea how it will go," Estalella said of September bookings. "The situation can change much more quickly than before. The demand has changed, supply has changed and the 'last-minute' Internet phenomenon has changed marketing radically.
"To continue winning will require a lot of effort and imagination."
Reporting by Ben Harding; Editing by Eddie Evans