Spanish Hoteliers’ Profitability Shoots Up Due to Tourist Boom

08/08/2017

The increase in demand, coupled with an updated hotel portfolio, has led to record occupancies and has allowed large groups increase prices by double digits.

Tourism in Spain has continued its vertiginous climb of the last five years and, after beating a new record with 75.6 million international visitors in 2016, forecasts indicate that this year there could be a return to record highs with the arrival of 84 million foreign tourists, which would make the country the world leader in the sector, surpassing France.

Among the big beneficiaries of the tourist boom are the large Spanish hotel groups, which anticipate an excellent summer season and expect an increase in their revenues, thanks to high demand and a double-digit increase in prices, brought about by high occupancy rates and the modernization of hotel portfolios. Large chains have thus been able to reach prices and occupation rates last seen in 2007, and, in some cases, profitability has also reached pre-crisis levels.

Specifically, Meliá, the top Spanish hotel chain by number of rooms, which has focused on improving room rates to increase occupancy, and maximizing operating efficiency in newly repositioned hotels, is predicting a strong third quarter. The hotel group owned by the Escarrer family achieved a 15.7% increase in average revenue per room available (RevPar) in hotels in Spain up to June and plans to conclude the current tourist season with a RevPar higher than the previous year in all areas.

Holiday Rentals

Meliá points out that the best performing area is the Canary Islands, where it is registering the most significant increase in prices, and the peninsular coast. The most important market for the chain is still the British, which saw growth of 8%. By contrast, the German, Italian and Spanish market figures are below the previous year.

Regarding the Balearic Islands, although occupancy rates continue to improve, high season prices hide a decline due to the early sales in the British market and the fall in German and Russian visitors, due to the recovery of Turkey, the main competitor in last-minute bookings. Likewise, the demand for short-term private holiday homes is significantly damaging sales of regulated tourist accommodations in the Balearic Islands, Meliá says.

The Barceló hotel group anticipates occupancy rates of 94% in the Balearic Islands and of more than 90% in the Canary Islands, as well as an improvement in prices of 11% and 9%, respectively. In Andalusia, the group estimates that price increases will exceed 10%, with occupancy rates at 90% in August.

Regarding the main European markets, the United Kingdom is still the number one in the Balearic Islands, with growth of 5% over the previous year, followed by Germany, with a 6% increase, Italy (+8%) and France (+5%). Meanwhile, domestic market demand in this destination has grown 12% over the previous year and is expected to grow even more, since it is a market that does not book rooms so far in advance. Spanish tourists are also the main engine of growth for the Barceló Group in Andalusia.

The company already achieved record EBITDA and recurring net profit last year.

In the case of the Palladium hotel group, the chain has increased prices in Ibiza by 4% on average, although growth is higher in some areas such as San Antonio and Santa Eulalia, with increases of 8% and 6%, respectively. The best markets remain the British and German, accounting for 37% and 17%.

This will be the Matutes family’s first summer in the Canary Islands, since the opening of the Hard Rock Hotel of Tenerife in October. The company notes that bookings are performing very positively.

For its part, RIU Hotel & Resorts anticipates high occupancy in July and August, as well as an extended tourist season. RIU points out that, although the summer is off season in the Canary Islands, in recent years the occupancy has remained high throughout the year. In addition, it has renovated its hotel portfolio on the Costa del Sol which, together with the popularity of the destination, is positively impacting demand.

RIU is estimating an improvement of between 5% and 7% in average room rates. The firm underlines the positive performance of the German market, the increase in Scandinavian and British visitors, as well as the rebound in bookings by Spanish nationals, up 5%.

Germany

The Canary Islands and the Balearic Islands are Iberostar’s top destinations, where returns have been the highest compared to the peninsular coast, which is more dependent on the Spanish market. Together, the Fluxá family’s chain anticipates an increase in RevPar of 10% thanks to increased prices resulting from high demand and to investments made to reform and modernize its establishments.

Iberostar emphasised the strength of the British market and the Benelux area, while detecting a downward trend in the German and Spanish markets. Iberostar believes that domestic demand has not yet fully recovered. The hotel group believes that the cut in the duration of the stays during the traditional high season is still a reality in the case of the Spanish market. In addition, it considers that price increases have affected demand from families, while other segments such as couples or single adults have only continued to rise.

Grupo Piñero, with a presence in Tenerife and Mallorca, expects to reach average occupancy rates of 94% and 84% and a RevPar increase of 7% and 13%, respectively.

Regarding demand, Grupo Piñero anticipates a rebound in German and Polish visitors, and a recovery of the Russian market in Mallorca. In Tenerife, the demand by the British – the ones that contribute the most to sales – has registered a slight decrease, compensated by improved performance in other markets.

Original Story: ProOrbyt Expansion – Rebeca Arroyo

Translation: Richard Turner

Excem Launches 2nd Socimi & Spends €22M On 1st Asset In Madrid

31 July 2017 – Eje Prime

Excem is on a roll. The company has just launched its second Socimi, Sociedad de Inversión Turística (Situr), dedicated to hostels and tourist apartments. The group, led by the Hatchwell family, will invest €250 million on the launch of this new investment vehicle, which will be led by Amir Yerushalmi, former director of the US fund Gaia. Moreover, the new entity has just acquired its first asset in Madrid for €22 million.

In March, as Eje Prime announced, the company activated its second company specialising in hostels for young people, whereby following the roadmap drawn by the group when it proposed the project, which also includes the creation of a third Socimi specialising in assets destined for use as co-working spaces.

The company constituted the hostel business, which operates under the name Excem Capital Partners Hospitality, and which at the time had just one administrator, Philip Hatchwell Altarar.

The investment to be undertaken by this second Socimi will amount to €250 million between now and 2018, approximately. The company has set itself the objective of owning 3,500 beds in a dozen buildings, primarily in Madrid and Barcelona, as well as in other tourist cities around the country.

Excem’s second project responds to a “latent demand”, according to the company, which maintains that each year young people from all over the world spend more than $230,000 million travelling and that there are only six companies in the world specialising in offering them high-quality accommodation at competitive prices.

With the company structure already in place, Excem has acquired its first asset through Situr. The company has purchased an asset located at number 3 on Calle Postigo de San Martín, in Madrid. That property, which is located opposite the Monasterio de Las Descalzas and Puerta del Sol, has a surface area of 4,000 m2 and 400 beds. Excem has spent €22 million on this purchase.

Excem’s second Socimi has been created with the aim of acquiring between ten and fifteen buildings, during the first phase and starting in Madrid, to build up a portfolio of 3,500 beds in the historical centres of the main cities in Spain, Europe and the USA, which will be managed as hostels.

In addition to this first asset in Madrid and a second committed property in Málaga, Situr has already chosen more than 30 buildings in main cities across Spain to continue its acquisition plan. According to the company, “we expect to undertake a capital increase for Excem Socimi Situr between September and December 2017 and start to debut on the MAB in 2019” (…).

Original story: Eje Prime (by C. Pareja)

Translation: Carmel Drake

Hispania Buys 2 Plots In Canary Islands For €13M

31 July 2017 – Idealista

Hispania is pushing ahead with its strategic plan and, to this end, has completed the purchase of two plots of land on which it will build 2 luxury resorts. The plots of land acquired by the Socimi for €13 million are located in the Canary Islands, specifically, in Lanzarote and Fuerteventura.

In addition to hotel resorts, the objective of the investment vehicle, in which the magnate George Soros holds a stake, is to incorporate retail, leisure and sports facilities into the complexes. The project looks set to involve a total investment of around €50 million in the case of Lanzarote alone.

Hispania already owns the Occidental Playa and Barceló Lanzarote hotels, and based on the plans that it has in mind, the five-star complex would contain more than 1,000 rooms, which would make it the largest establishment in Hispania’s portfolio. In Fuerteventura, the Socimi also owns several properties, including two hotels that it purchased in the summer of 2015 for just over €100 million.

Over the last week, Hispania has been in the news for several reasons. Firstly, it is negotiating the sale of 24 office buildings for around €500 million; the insurer Swiss Life is the final candidate in that process.

In addition, the Socimi saw the stock market debut of the investment vehicle that it shares with Grupo Barceló (known as Bay Hotels & Leisure), which started trading on 20 July with a market value of almost €500 million.

Original story: Idealista

Translation: Carmel Drake

Hispania’s Profits Rose By 35% In H1 2017 To €185M

28 July 2017 – Expansión

Hispania, the Socimi in which George Soros owns a stake, recorded net profits of €185 million during the first half of 2017, which represents an increase of 35%. It invested €100 million during that period.

At the end of the first half of the year, the company’s portfolio was worth €2,339 million, which represents an increase of 10%. The company owns 39 hotels, with a total of 11,200 rooms and is consolidating its position as the largest owner of hotels in Spain.

In addition, the Socimi owns 25 office buildings with a combined surface area of more than 153,000 m2 and a plot of land where two additional buildings measuring more than 33,000 m2 are going to be constructed. It also owns five residential buildings, which contain almost 730 homes.

Liquidation

Hispania is planning its liquidation in 2020 and has already started to implement its divestment policy. Specifically, during the first half of the year, Hispania sold the Aurelio Menéndez office building for €37.5 million and continued to sell off its homes.

Specifically, during the first six months of the year, it sold 25 homes in Isla del Cielo and Sanchinarro (Madrid), generating a net profit of 35% compared with the original investment.

Original story: Expansión (by R. Arroyo)

Translation: Carmel Drake

Aina Purchases 50% Of Gran Hotel Velázquez From Didra Group

25 July 2017 – Expansión

Aina Hospitality – the fund promoted by Edmond de Rothschild and Jaume Tàpies – has purchased 50% of the iconic Gran Hotel Velázquez from the Didra Group. The property is located at number 62 of the Madrilenian street whose name it bears.

This asset, located in the neighbourhood of Salamanca, just a stone’s throw from the Retiro park and in the heart of Madrid’s golden mile, has been owned by the Didra Group for just a few months. It is currently undergoing a comprehensive renovation with the aim of ascending its category.

Together with the Didra Group, owned by the Ardid Villoslada family, Aina Hospitality will reposition the property, transforming it into a five-star hotel. Last year, the family office owned by the Ardid family reached an agreement with the Salazar family – the former owners of SOS Cuétara – to purchase this hotel for €63 million and now, almost a year later, it has decided to open up the share capital to Aina Hospitality.

At the moment, the four-star Gran Hotel Velázquez, has 143 rooms but it recently closed its doors to undergo a complete refurbishment.

Repositioning

Following its renovation, the hotel will have 111 rooms and suites, a restaurant, a rooftop terrace, cinema, bowling alley, luxury spa and fitness centre.

Tàpies, the CEO of Aina Hospitality, highlighted the excellent location of the hotel: “Madrid is a cultural, historical and leisure destination and it is a tourist and financial centre. This hotel is located in the centre of the city, close to some of the most important tourist attractions and the historical centre”.

The operation represents Aina Hospitality’s seventh investment in Europe and is in line with the investment strategy carried out by the manager to date. Aina Hospitality purchases high-end properties – with four- and five-stars ratings. In addition to Madrid, the fund has recently made acquisitions in Paris, Eindhoven, Vienna, Brussels and Berlin.

Original story: Expansión (by R. Arroyo)

Translation: Carmel Drake

Hispania & Barceló’s Hotel Socimi Will Make Its Stock Market Debut On Monday

21 July 2017 – Expansión

Hispania and Barceló’s hotel Socimi is on the home straight for its stock market debut. Bay Hotels & Leisure – in which Hispania holds a 76% stake and Barceló a 24% stake – will debut on the stock market on Monday after receiving a favourable report from the Alternative Investment Market (MAB)’s Coordination and Incorporation Committee. Taking into consideration the high valuation range of the report prepared by the consultancy firm CBRE, the Socimi’s Board of Directors has set a reference value of €5.29 for each one of its shares, which represents a total company valuation of €494 million. CBRE has considered that the best methodology for valuing the company is the adjusted value of the own funds after tax. This valuation also discounts the ordinary dividend of €3.5 million paid on 10 March 2017.

Holiday hotels

At the end of 2016, the company held 21 assets with a net accounting value of €790 million. Specifically, 19 hotels worth €756 million, as well as two shopping centres and the concession for a marina worth €34 million. So far this year, the company has purchased the Hotel Selomar in Benidorm (245 rooms) for €15.6 million, the Hotel Fergus Tobago in Palmanova (275 rooms) for €20.2 million and the Armadores de Puerto Rico company, which owns the land adjacent to Hotel Barceló Oasis Lanzarote, for €6.2 million.

In this way, the company currently owns 21 hotels and a total of 7,423 rooms located in established tourist areas that receive high volumes of foreign tourists. Specifically, 62% of the rooms are located in the Canary Islands, 30% in the Balearic Islands and the remaining 8% in Andalucía.

The hotels owned by Bay are leased to Grupo Barceló under a series of contracts with an initial duration of 10 years and a maximum of three extensions, with the exception of Hotel Meliá Jardines del Teide, which is leased to Meliá until 2024 (…).

Barceló constituted Bay Hotels & Leisure in July 2014 and in April 2015 signed an investment contract with Hispania whereby the Socimi in which George Soros owns a stake, undertook to acquire a majority stake. By virtue of that contract, Hispania acquired 80.5% of the share capital in October 2015 for around €119 million although, following a capital increase recorded at the end of that year, its stake was diluted to 76%.

The company closed 2016 with a turnover of €65.7 million, compared with €13.2 million last year. Moreover, during the first three months of the year, it recorded revenues of €19.1 million, up by 22% compared to the same period a year earlier.

The company’s financial result as at March 2017 decreased by 7.5% as a result of the acquisition of Hotel Meliá Jardines del Teide and, specifically, the financial expenses resulting from a mortgage loan amounting to €22 million (…).

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Senator Buys Hotel Parque Central de Valencia From Sareb

21 July 2017 – Hosteltur

Senator Hotels & Resorts has purchased Parque Central Hotel de Valencia from Sareb. The chain has operated the establishment since 2010 under its urban Senator Hotels brand. It has also taken ownership of the property’s garage.

The hotel in question comprises 192 rooms and is located in the subsequent development of Parque Central de Valencia next to the AVE station, in a very central area and close to the city’s historical centre and shopping district.

The establishment also has meeting rooms with capacity for up to 1,100 people, which are ideal spaces for holding conferences and banquets.

Original story: Hosteltur

Translation: Carmel Drake

Sareb Puts 209 Assets Up For Sale, Including 37 Hotels

21 July 2017 – Cinco Días

Sareb has launched a campaign to sell a portfolio of 209 properties. The portfolio includes commercial premises, warehouses, offices and 37 hotels, located primarily in the interior of Spain.

The entity has already taken advantage of the increasing interest in the hotel sector to sell Hotel Parque Central de Valencia this week to the Hoteles Playa Senator chain. The four-star complex, located in the capital of Valencia, has 192 rooms and 128 parking spaces.

The entity has launched the so-called “Your business project…starts here” campaign and has also created a website www.sarebterciarios.com, with information about the 209 assets up for sale. The properties are located across 15 autonomous regions, although the majority can be found in Madrid and Castilla y León.

Most of the hotels are actually located in the latter region. The cheapest is located in Mombeltrán, a small town in Ávila; the so-called Real Posada estate is on the market for €528,000. At the other end of the spectrum, the tourist complex with the highest price is located in Las Palmas, comprising 103 apartments; its asking price exceeds €6 million.

The most expensive asset up for sale as part of this campaign is located in the north of Madrid: an office building worth €18.9 million. In the same autonomous region, the bad bank is also selling the cheapest office of the 33 on offer: a unit close to the Plenilunio shopping centre, which has an appraisal value of €80,000.

In terms of the 97 commercial assets, Madrid is also the autonomous region that is home to the most, with 14. Noteworthy properties include the former Cines Cristal on Calle Bravo Murillo, which is being sold for €6.7 million. Behind the capital in this ranking comes Cataluña with 13 assets and Valencia and Andalucía with 12 properties each. The most affordable commercial space is located in Las Palmas; that property is worth €160,000.

Of the 42 industrial warehouses up for sale, half are located along the Mediterranean Coast, 12 are in Cataluña and 9 are in the Comunidad Valencia. The most expensive warehouse is located in Polinya, Barcelona, and its asking price is €7.6 million. By contrast, the cheapest is being sold for €11,003 and is located in Betera, Valencia.

Original story: Cinco Días (by Fernando Cardona)

Translation: Carmel Drake

Four Seasons Arrives In Madrid With Suites Costing €12,000/Night

21 July 2017 – Expansión

At the beginning of 2019, when the 22 luxury homes are completed in the Canalejas Complex, the Four Seasons hotel will also open its doors. It will be the famous Canadian chain’s first establishment in Spain.

The hotel will contain 200 rooms, the smallest of which will have a minimum surface area of 45 m2 (a standard room) and the largest of which will span 400 m2 (the Presidential and Royal suites). “From the start, we were clear that the ideal brand for Madrid was Four Seasons. The city does not have any major luxury hotel operators, whereas Paris and London have 15 or 20”, explained Francisco Meliá, CEO at OHL Desarrollos.

The hotel is being designed by the team at Lamela Arquitectos (which is taking care of the entire project to restore the complex) and the US interior design studio Bamo. “Four Seasons estimate that around 65,000 people per year will visit the hotel”, said Meliá. “The brand did not have any hotels in Spain and so this is a very important milestone for it. In fact, the firm is now looking at other locations in Madrid and Marbella”, he added.

The objective of Four Seasons Canalejas will be to take advantage of the tourism that already comes to Spain, but also to attract a new luxury audience, says Meliá. “Four Seasons has a unique service culture. For example, there will be a ratio of two employees per room. Moreover, the staff receive unique training so that they never have to say no to a client”.

The rooms at the Four Seasons will be the most expensive in Madrid (currently, that record is held by the Villa Magna). “The hotel prices will range from €500 for a single room to €12,000 for a suite, per night.

In addition to the 200 rooms, the hotel will house two restaurants, an indoor swimming pool and a spa. “In the case of the restaurants, the staff serving will be employed by Four Seasons but we are talking with high-profile operators both from Spain and overseas regarding the management of the restaurant, given that the intention is for these restaurants to be set a new benchmark in the city, both for tourists and Madrilenians”, said Meliá.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Hotel Investors Switch Their Focus To Spain’s Second Cities

20 July 2017 – Expansión

Hotels have become of the star assets of the real estate sector with Socimis and investment funds lining up to buy them. And the forecasts show that these actors are set to consolidate their presence in Spain, gaining ground on the hotel groups – which will continue their commitment to a strategy focused increasingly more on management and less on ownership – and will analyse new secondary locations, in light of price rises and the decreasing yields in prime cities.

According to the Hotel Asset Management 2017 report, prepared by Magma HC, three-star hotels captured the attention of investors last year, given that they represent the most attractive asset for implementing repositioning models and improving prices. Specifically, 38% of the transactions closed in 2016 involved three-star hotels, 28% related to four-star properties, 24% to low-cost establishments and the remaining 9% to five-star hotels.

Albert Grau, Managing Partner at Magma HC, explained yesterday that the transaction market will shift its focus to the holiday segment, over the next few months, due to the (high) value of assets in prime urban destinations, such as Barcelona, Madrid, Málaga, San Sebastián and Palma de Mallorca, which are at levels that compromise their future profitability.

Although in previous years, the urban hotel market was the most sought-after by investors, in 2016, it accounted for just 33% of operations, whereas the holiday segment increased to account for 66% of the total. “Prices in cities such as Madrid and Barcelona have peaked, and purchases to generate wealth or profitability are complicated given the numbers”, said Grau.

By contrast, he considers that Spain’s secondary cities offer “great opportunities” for investors thanks to the significant potential that they hold and the fact that there are well-located assets there at “very attractive” prices.

However, the partner at Magma HC considers that the sector is a long way from a bubble, thanks to the greater professionalisation and the new requirements in terms of indebtedness levels.

Moreover, the report highlights that the Spanish hotel sector can expect to see new operations between hotel groups, such as between Starwood and Marriott, Fairmont and Grupo Accord and the purchase of Sidorme by B&B Hotels.

Commitment to rent

In terms of the business model, the most popular formula is still rental. Grau underlines that, given the strong performance of the market, owners who took the decision to bet on variable rentals are now receiving greater returns. In addition, the partner at Magma HC believes that the period of rent renegotiations, seen in previous years, is now over.

According to Magma HC’s report, hotel groups own 37% of their assets, lease 33% of them, manage 18% and operate 13% as franchises.

Grau explains that “more Anglo-Saxon” operations – management and franchising – are not growing, but continue to have a specific weight in the market and there is a growing trend to adopt them increasingly more, in line with international standards.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake