Once the basket case of Europe , Spain has returned from the dead and its hotel market is one of the brightest spots in Europe .
Operators have been enjoying improved occupancy , average rates and RevPAR as tourism kicks up . Spain drew more than 75 million visitors in 2016 and hoteliers are expecting 80 to 85 million this year .
“ Four years ago , it was a disaster ,” says Jairo González , CEO of B & B Hotels in Spain and Portugal . “ But tourism is back and domestic demand is better due to the economy recovery . People are spending money .”
The elephant in the room is Catalonia ’ s move to secede from Spain and pressure from Madrid to thwart a breakaway . Hotel operators say the unrest threatens to stall the recovery and note that Barcelona hotels are seeing cancellations . Barcelona already had disrupted the market by imposing a ban on new hotel licenses in the city center . That ’ s prompting investors to look to Madrid and secondary cities such as Granada , Seville and San Sebastian , which are still recovering from the recession .
Three of Spain ’ s largest operators — Barceló Hotels Group , AccorHotels and Marriott International — have 14 projects in the country with 1,925 rooms under way , data from Lodging Econometrics show . Yet the 17,356 overall rooms to be added by 2019 will increase supply by less than 5 %, according to Lodging Econometrics .
A newer influence is institutional capital — Spanish and U . S . REITS , private equity and family offices — with investors adding liquidity by renovating older or distressed assets , sometimes rejuvenating properties sunk by nonperforming loans . Investment transactions soared more than fourfold to US $ 2.4 billion in the first half of this year , according to CBRE Hotels .
“ A fragmented ownership base and inefficiencies present opportunities for turnaround funds ,” says Keith Evans , London-based vice president at Starwood Capital Group . “ There are a lot of institutional investors but a scarcity of supply – of deals available .”
Starwood Capital ’ s joint venture with Meliá Hotels International recently sold 2,000 keys , or two-thirds of a portfolio of beachfront hotels , to a London-based family office , London & Regional Properties . The joint venture is launching a second round of renovation on the 1,000 keys it retained , Evans says . And Blackstone Real Estate Partners Europe V in October agreed to acquire Hotel Investment Partners , which owns 14 primarily coastal hotels , from Banco Sabadell .
Spain ’ s beach resorts led the recovery beginning with the Arab Spring of 2010 and subsequent civic upheavals in the Middle East and North Africa . The strife caused affluent Europeans to shift vacations to the safer footing of Spain ’ s Costa del Sol , and the Balearic and Canary Islands , according to Sophie Perret , a director at London consultancy HVS . “ That was an inflection point ,” she says . “ People decided it was better to pay more and be safe in Europe .”
Although Spanish operators historically have dominated the resort market , international firms have joined the party . Marriott International ’ s W Hotels is investing with Hong Kong ’ s Platinum Estates Ltd . to open a beachfront complex hotel near Marbella in 2021 with 200 guest rooms and 100 low-rise condos and villas . And France ’ s Club Med is returning to Spain in a deal with Arab investors to renovate a 40-year-old hotel in Marbella .
With the resort market near peak and Barcelona mostly out of play , investors see potential in Madrid , as well as Granada , Seville , San Sebastian and Bilboa — cities known for cultural attractions and cutting-edge cuisine .
“ The cities are still recovering ,” says Raúl González , CEO for Europe , the Middle East and Africa at Barceló . “ So there ’ s more room for improvement .” Barceló operates 232 properties , 58 in Spain . The company ’ s mix has historically been 70 % resort but the urban focus is apt to shift the balance , González adds .
Barceló opened its first 5-star hotel in Madrid early last year — Barceló Emperatriz , named for a 19th-century empress and advocate of women ’ s rights . A second 5-star hotel in Madrid — Barceló Torre de Madrid — followed last year . Seven hotels are in the works , including locations in Granada , Barcelona , Madrid and Cádiz .
Fast-growing Room Mate Hotels has made a splash with its highly designed boutique hotels in European and North American . It operates 13 Spanish hotels , with five in Barcelona and four in Madrid . It ’ s opening two more in Madrid and one in San Sebastian . “ San Sebastian is coming up strong ,” says President and founder Kike Sarasola , referring to the north coast city known for its Michelin-starred restaurants and fresh food markets .
San Sebastian is on the radar of another fast-growing chain , France ’ s B & B Hotels . B & B acquired the Spanish chain Sidorme and its 15 budget properties last year and has 10 in the pipeline , according to Spanish CEO González . The chain has one hotel on the outskirts of San Sebastian near the French border and is developing a second on the south side . “ The city center is impossible , it ’ s so expensive ,” he says . “ But we like the north ( of Spain ) because the competition in the south is fierce .”
There are still obstacles – the specter of terrorism , instability in Catalonia and heightened competition from Airbnb and other sharing-economy players . The challenge for Room Mate ’ s Sarasola : “ How do we grow without losing our edge ?”
December 2017 hotelsmag . com 31