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Hotel Chains Invest €2.5 Billion to Reposition Their Portfolios

23 August 2017

Meliá, Barceló, RIU, NH, Palladium and Iberostar redouble their investments to reach new markets, reinforce the presence of their premium brands and raise prices.

The hotel chains are taking advantage of the boom in tourism and profits from recent years to invest in upgrading their assets. The Spanish groups have launched investments of about 2.5 billion euros in recent years and are planning to increase them further to reposition their asset portfolios, boosting their premium segment to attract clients willing to spend more on better accommodations.

With these measures, the hotel groups are seeking to boost profitability and enhance operational efficiency by focusing more on prices than on occupancy, where they have little room for growth. In addition, companies are looking to enter new markets, diversifying risks should the current cycle change.

One of the most active in the repositioning of its assets has been Meliá Hotels. The company allocated 260 million euros last year to the maintenance and refurbishment of its establishments around the world. The firm has emphasized the improvement of its hotel portfolio in Spain. Specifically, in the last five years, it has invested €500 million with its partners to upgrade its Spanish hotels, of which more than €200 million have gone to Magaluf (Mallorca).

For its part, RIU invested $500 million dollars last year in the purchase, construction and renovation of hotels and plans to allocate more than $400 million in 2017 for the complete renovation of six hotels and further openings. In recent years, the chain has renovated 13 hotels with a cumulative investment of $200 million projects in Spain alone.

Openings

With regards to new openings, the RIU hotel group plans to open its first hotel in Madrid in 2019. The company chose the Edificio España for its arrival in the Spanish capital, where it will invest between €380 million and €400 million, including the price paid to Baraka for the purchase of the asset last June.

Iberostar is another of the hotel groups that has launched an investment program to open new hotels and update some of the establishments in its portfolio. In 2016, it opened hotels in new areas such as the United States and Ibiza. In addition, as part of its policy of reinvesting profits, in 2016 it dedicated more than €90 million to the hotel renovations and plans to allocate more than 300 million euros in partial and total renovations by 2018.

For its part, Palladium has opted to grow in the Caribbean and reposition its presence in the Spanish islands. The hotel group belong to the Matutes family last year allocated 80 million euros to Hard Rock Tenerife and will invest 450 million euros up to 2018 to reposition two hotels in Ibiza, remodel and expand its hotels in Rivera Maya and the open two establishments in Costa Mujeres and another in Cancun, all in Mexico.

Within the framework of its strategic plan, NH invested 200 million euros in the renewal of assets between 2014 and 2016. Investments in Spain accounted for 42% of this figure. As a result of the strategic plan, at the beginning of 2017, one of every five of the group’s rooms belongs to the chain’s premium brands NH Collection and nhow.

Similarly, Barceló has launched a new set of brands and destined an average of 100 million euros per year to reposition its product portfolio.

The Piñero Group’s strategic plan is to upgrade their existing hotels and pursue a consolidation in its main markets through the opening of new establishments. To this end, the chain has invested €50 million in the construction of a new five-star luxury hotel in the municipality of San Miguel de Abona.

Original Story: Expansión – Rebeca Arroyo

Translation: Richard Turner