12 January 2018 – Hosteltur
Last year saw investment in the Spanish hotel sector break all records, with investors spending €3.907 billion on transactions involving existing hotels, properties for conversion into hotels and land for the construction of hotels. That figure represents an increase of almost 80% with respect to 2016, according to Miguel Vázquez, Managing Partner of the Hotels Division at Irea; and was the result of the sale of 182 establishments comprising 28,813 rooms, with an average price per room of €119,000, compared with an average price per room of €92,000 in 2016 and of €85,000 in 2015, which represents an increase of 40% in just two years (…).
According to the Irea Director, this investment boom was driven “not only by the greater number of operations but also by the fact that the prices of the assets sold were higher as they were coming onto the market after being repositioned in recent years. The types of investors have also changed, as have their demands in terms of returns: around 5-6% in the urban segment and around 6-7% in the holiday segment, given that we are no longer seeing as many opportunistic funds entering the market (…)”.
In fact, he has quantified that “more than 2,000 holiday hotels still need to be renovated and repositioned. There is a wide range of opportunities that the funds are focusing on, in search of agreements with small chains at times of generational changes and when they are interested in selling…or not, because the strong buyer pressure is continuing to motivate owners who are not typically sellers to put their assets on the market, especially independent operators. And that is leading to the entry into the market of large holiday hotel portfolios, which is what investors are backing Spain for, as well as independent hotels”.
Forecasts for 2018
And after “the stratospheric data of 2017”, in the words of Vázquez, “the inertia with respect to 2018 is very positive, the year is starting off very well”, although he thinks that hotel investment will moderate and “the effect of the uncertainty in Cataluña will make it very difficult for us to see a repeat of last year’s figures”.
Nevertheless, he cites three operations that should be resolved during the first few months of this year: the completion of the purchase of the Alua portfolio by Hispania (…); the sale of a portion of the Ayre hotel portfolio, which is currently on the market; and the launch of a hotel Socimi by a financial entity with 15 establishments, which could take place soon.
Vázquez estimates that the investments already committed for the first few months of the year identified by Irea amount to €4 billion, comprising mainly new build projects, taking advantage of the increase recorded in the purchase of land for the construction of hotels, with operations in Bilbao, San Sebastián, the south of Tenerife, Barcelona and Sevilla.
In terms of the strengths in the market, besides the repositioning of hotels that is leading to an improvement in competitiveness and the appeal of Spain as a destination, the Director highlighted “the magnet effect of qualified investors such as Blackstone, which are reinforcing Spain as a destination for hotel investment” (…).
Vázquez highlighted the overheating of prices that is happening in destinations such as the Canary Islands, where the average (sales) price per room has increased to €152,000, compared to the national average of €119,000, although, it should also be taken into account that “the operation that carried the most weight in terms of those figures was Sabadell’s sale of HI Partners to Blackstone (…), involving high quality, repositioned hotels, which increased prices”.
In fact, the most expensive prices were recorded in Barcelona and Madrid, which holds the record for the sale of the most expensive room with Operación Canalejas, for approximately €1.4 million, whereby exceeding the figure of €1.2 million recorded during the sale of Hotel Villa Magna (…).
In the Balearic Islands, as the director acknowledges, “there is still more margin because there are a lot of hotels there that still need repositioning and, although there is price inflation, it is not as marked as in the Canary Islands, which benefit from having year-round demand and five years of high occupancy rates, which drives up prices”.
Original story: Hosteltur
Translation: Carmel Drake