Prices are rising on one of Europe’s most popular islands

A seaside restaurant charges 30 euros ($30) for a burger.

A large sunbed at an upscale beach club can cost 500 euros in August.

And a table at a “VIP” nightclub can run into the thousands.

Though Spain is generally considered a reasonably priced travel destination, the Spanish island of Ibiza has long been known as a place for living the high life.

“The pricing is silly,” said Ben Pundole, a luxury hotel consultant and longtime Ibiza visitor, in an email to CNBC. “After 23 years in New York, I can only compare it to the Hamptons in the height of [the] season.”

Yet Ibiza’s visitors are happy to spend big, Pundole said.

“Ibiza is very expensive, it’s always been expensive,” he said. “But people are willing to pay.”

Rising prices
While hippies were drawn to Ibiza for its rumored “magnetic” vibrations in the 1960s, it was arguably British-Australian Tony Pike who put the island on the map when he opened the Pikes Hotel, now known as Pikes Ibiza, in 1980. The small hotel transformed a 500-year-old estate in the hills into a party haven.

Pike’s rich and famous friends, such as Freddie Mercury, George Michael and Kylie Minogue, stayed at the hotel — and it’s still a place that draws crowds to its rooms, restaurant, and dancefloor.

The 1980s also saw the rise of clubs such as Amnesia, Space (now home to Hi Ibiza) and Pacha, with the latter currently charging 13 euros ($13) for a regular can of Coca-Cola. More clubs have since opened, including Ushuaia, which was named the third best club in the world in 2019 by the International Nightlife Association.

Restaurants, clubs, holiday rentals and taxis have all noticeably hiked prices this year, Pundole said.

“It’s an island, it’s seasonal, businesses are making up for two years of lost revenue, there’s supply chain issues and the pent-up demand is enormous,” he said.

Indeed, the number of tourists visiting the Balearic Islands was up 300% year over year in May, according to Spain’s National Institute of Statistics.

‘Established glamour’
Ibiza’s reputation as an upscale destination evolved over a few decades, said Carolyn Addison, head of product at luxury travel specialist Black Tomato. “It has this kind of … established glamour. So, there’s a lot on offer that is expensive,” she told CNBC by phone.

“You would have to trace it back to the ’60s when there was this sort of … hippie crowd that washed up,” she said. “As that crowd maybe got older, richer, more established, [it] defined the island in a new way.”

A six-night trip organized by Black Tomato starts from around £6,100 ($7,260) per person, including accommodations, breakfast and a one-day private yacht charter (the price excludes flights).

Six Senses Ibiza is popular with Black Tomato’s clients, said Addison. The luxury hotel announced the addition of 19 private residences and two “mansions” in June.

Mansions cost around $16,000 per night in the summer, according to the hotel’s website. Guests have access to a spa, kids’ club and daily activities such as kayaking and cliff jumping. Each comes with a “Guest Experience Maker” who can organize nightclub entry and boat trips, according to the hotel.

Also new at Six Senses this year is Beach Caves, a venue with a restaurant, live music space, recording studio and six suites with extra-large beds, near the town of Portinatx on Ibiza’s north coast.

Pundole, who is Beach Caves’ creative director, described the area as having “a different vibe,” and called it “curious, mystical, equally as hedonistic, and as bohemian as anywhere you could imagine.” Beach Caves suites start from 1,565 euros a night in the summer.

This year also saw luxury hotel group Mandarin Oriental take over management of Tagomago, a private island off Ibiza’s eastern coast. The entire island is available to rent for around 30,000 euros a night during the high season, which includes a private villa, chef, concierge, butler, villa host and yacht captain, according to a promotional brochure.

Luca Finardi, operations director of Mandarin Oriental Exclusive Homes, said Tagomago’s clientele comprise “a variety of high-end individuals from all over the world.”

Luxury demands
Asked why Ibiza is so expensive, Finardi said by email that the island is popular with upmarket travelers who want a combination of “beautiful scenery, high quality restaurants and bars, chic shopping experiences and lively nightlife.”

“It also provides lovely areas where guests can find quiet corners to escape the crowds,” he said. “It represents value for money to people seeking these experiences.”

At A.M.A Selections, a luxury home booking site that launched in June, the average cost of a 10-day villa stay on Ibiza is around 26,500 euros, according to co-founder Mariek Anselme. Most clients add services such as pop-up cinema experiences — which start from 500 euros per screening — as well as private chefs, yoga classes and spa treatments.

“The island is able to strike a balance of authentic, boho charm with upscale offerings popular amongst VIPs and wealthy travelers,” Anselme told CNBC by email.

“For decades it’s pulled in iconic names in the music industry, creating an elite and extravagant entertainment scene … In recent years we’ve seen more global leaders in luxury hospitality open in Ibiza, giving it a world-class status that is able to command high prices,” she added.

Lucy Handley www.cnbc.com