Investors in Spain 'on hold’

Ramada

Investors looking to the Spanish market were expecting to see opportunities after the summer season has passed.

A study from Christie & Co found that the urban hotel market had established itself as the main growth driver in the tourism sector in the country, something which could change this year as the pandemic turned attention to resorts.

Inmaculada Ranera, managing director, Spain & Portugal, Christie & Co, told us: “This year it is not easy to know where investors will put their equity. They were all letting us know that they would consider both type of opportunities, resorts and urban, but with the premise of having a good location (beachfront or central on each segment). But we can see now that the money is on hold as all are expecting opportunities to arise after the summer season. 

“Potential sellers are also waiting to have more visibility with regards to bookings evolution. Definitively, urban markets recovery will take longer, as in most cases, the majority of hotels are postponing reopening to September, whilst resorts will reopen now in July and in August. It is expected that September this year might look more similar to previous years in terms of KPIs.  All in all, we don’t have yet enough visibility of how the investment market will look this year.

The study reported that, in 2019, urban destinations achieved record results thanks to their connectivity, improvements in hotel supply and increased demand, driven by both the growth of the
international segment and the recovery of business tourism.

Urban destinations represented 59% of the total investment volume in 2019, which reflected a good
demand evolution, particularly in the corporate and business segments, together with positive revpar evolution and low seasonality.

In 2018, the 15 analysed cities registered at least one transaction and totalled €1.26bn in hotel investment. In 2019, only nine of those cities (Barcelona, Madrid, Malaga, Cadiz, Seville, San Sebastian, Valencia, Bilbao and Alicante) registered hotel investment activity, reaching a total of €1.14bn. Additionally, in 2019, investment in those cities represented 92% of the total investment in urban destinations (vs 70% in 2018), indicating a high concentration of the investment volume in main urban markets. 

Barcelona and Madrid were the most important cities in 2019, representing 54% of the total overnights in urban destinations and 12% of total overnights in Spain. 

Of the 15 cities analysed, 80% of the rooms were operated by hotel groups, with the main players being Meliá Hotels International, Marriott International, NH Hotel Group and Eurostars Hotel Company. 

Madrid was the city with the highest volume of future rooms (15 hotels and 2,163 rooms) with a clear focus on the luxury segment (50%), highlighting the openings of the Four Seasons Madrid, The Madrid Edition, and the W Madrid. Malaga registered the second largest volume of projects (15 hotels
and 1,564 rooms), distributed mainly between the four and five star categories, followed by Barcelona, with a total of 1,504 rooms (including the project of the Hard Rock hotel in Sant
Adria del Besos), and Seville (14 hotels and 1,341 rooms).

Revpar growth in Spain has been constant since 2014 (+8% CAGR 2014-2019). After a 10% increase in 2017, followed by a more moderate uplift in 2018 of 2%, in 2019 Spain
registered once again a significant revpar increase, of 8% on the year, sustained mainly by 6% ADR growth and a more moderate occupancy increase, of  2%.


Insight: The news that Brits were free to be abroad and resume their traditional Spanish summer exit was well received by hotels on, near and around beaches on Friday. It is unlikely that the enthusiasm was matched in the cities, with the idea of narrow streets, crowded spaces and restricted access to the culture not expected to tempt the travellers exploding out of lockdown. 

The tables have turned and resorts, with their wide open spaces, easily controlled and riddled with the kind of facedown relaxation many of us are gagging for, are the flavour of the season, and potentially the flavour of investors and brands too.

Henderson Park proved as much with its recent deal in Crete, https://www.hospitalityinsights.com/content/henderson-park-looks-to-leisure although that was agreed before the pandemic. There are plenty of others looking to temper their urban estates with resorts, but, as Renara notes, they want to see how the season plays out to gauge what bargains might be available. But whether now or after the hordes have left, Spain retains its attraction.