BERLIN (Reuters) - Demonstrations against mass tourism on Spain's Canary Islands have prompted European travel giant TUI to invest in housing for its staff rather than hotels, the company said on Wednesday, while trying to play down the size of the protests.

"We have offered to build housing for employees and others. We have proactively addressed the issue," TUI chief executive Sebastian Ebel said after Europe's largest tour operator reported quarterly earnings.

Last month, thousands of people protested in Tenerife and other islands of the beach-lined archipelago, calling on authorities to limit tourist numbers to relieve pressure on the environment, infrastructure and housing stock.

"This is a very important topic for us to clear up," Ebel said.

He argued that package tourism did not contribute to a housing crunch on the islands, saying that every holidaymaker TUI brings to the region has a bed in a hotel.

The protests were also less of an issue in the Canary Islands than made out in German media coverage, he added.

Nevertheless, the company will not be investing in new hotels there, the CEO said.

(Reporting by Ilona Wissenbach and Andrey Sychev, Writing by Rachel More)