One of Europe’s most famous beach resorts is scrambling to avoid insolvency after it was ordered to pay €350mil (RM1.608bil) in compensation over a real estate deal gone awry.
Benidorm – the Spanish city widely considered the birthplace of package tours – is now seeking a government bailout to help make the payment that’s more than double its annual budget.
Benidorm’s debt problem stems from the Spanish real estate boom of the early 2000s, when investors poured money into beachfront high-rises.
The region of Valencia, where Benidorm is located, was one of the epicentres of the boom, with widespread construction of holiday rentals and second homes.
The city hall will ask the National Credit Institute for a 12-year, €55mil (RM253mil) loan at 3.5% interest, according to a statement. It’s also seeking permission from the municipal council to start talks with the creditor group.
During the construction boom, a family of real estate developers agreed to hand over land to the city of Benidorm in exchange for plots where it would be allowed to build.
Different city administrations later failed to grant the family the requisite construction licenses. The family sued, and after years of litigation, Spain’s top court ruled in its favour, ordering Benidorm earlier this year to pay.
The compensation was set at €283mil (RM1.3bil) plus interest, bringing the total so far to more than €350mil as interests keep accruing. Mayor Toni Perez has said he would seek to cancel the debt without raising local taxes or cutting services.
In August 2025, Perez said the compensation was “historic and unprecedented” and could “cause damages that would be impossible or difficult to repair”, citing a report saying the city would go bankrupt if it didn’t receive aid.
In January 2026, he walked back on that claim and said the city wouldn’t go bankrupt.
The opposition Socialist party, however, has said the debt could mean the “technical bankruptcy” of the city.
Benidorm has 77,000 residents but receives almost 40 times that number of visitors every year, as tourists flock from Britain and other countries to its broad Mediterranean beaches, high-rise hotels, and palm-lined promenades.
Last year, the city received a record three million tourists, more than half of them from abroad, according to data from Spain’s national statistics institute. – Bloomberg
