Ups and Downs of Spanish Hotel Sector

27/10/2014 – Expansion

Spain is set to beat a new record high on the foreign tourist number said to reach 62 million visitors at the closing of 2014.

The Canary Islands have the best climate in the world. Both for the holidaymakers and for the business talks. The Tenerife island hosted a summit organized by Spanish Confederation of Hotel Owners (Cehat) and non-profit tourism organization Exceltur. The meeting, attended by such big-name brands as Iberostar, Paradores and Hotusa, has heard several noteworthy conclusions:

Lending returned, however it has not been felt by everyone yet. Do banks agree to finance hotel projects again? Yes and no. As Amancio Lopez Seijas, president of Hotusa and Exceltur said, “there is no excessive distrust in the sector but the real estate part of it stands in question. Loans are being granted again, though only for viable projects and to solvent companies”.

Investment funds fancy hotel assets. “Yes, indeed the interest of mutual funds in buying in the hotel sector upsurged”, remarked Sabina Fluxa, executive vice-president at Grupo Iberostar. Just look at the numbers. A vulture fund demands a 15-20% profitability, whereas for a more long-term investor a range of 10-12% is completely acceptable. All investment funds truly adore Spain: its hotels, retail centers, debt portfolios, etc. But the suspicion persists. “An investment fund is an alternative for financing but the cost and the risk must be taken into consideration, too. This vehicle shall not be chosen for a stable growth”, Mrs Fluxa admits.

Fair in terms of volume, but not profitability. The year 2000 saw 45 million foreign tourists visiting Spain. In 2014, their number is estimated to mark between 60 and 62 million. Over the fifteen years, the country managed to tempt 15 million visitors more but the total earnings dipped down by €4 billion to €45 billion. The good news is, according to Paradores’s chairwoman Angeles Alarco, that “prices are coming back to normal”. What if suddenly Germans, the French or Italians stop arriving? Directors have a solution for such a doomsday scenario: closing hotels in some locations and introducing high-tech innovations, as well as new products. This is how the sector could fight seasonability and make profits from establishments which open 150 – 180 days per year.

New black hole: the holiday apartments. As per statistics, of the 60 million foreign tourists visiting Spain each year, 11 million do not check in hotels but in homes of friends or acquaintances. Joan Molas from Cehat expressed his scepticism on this matter and pointed out unfair and illegal competition constituted by tourist accommodations and platforms managing them, such as Airbnb. The executive went as far as to state that “the Central Public Administration does not understand the problem, while the regional authorities do only a little”. The hotel owners feel oppressed by too many regulations, unlike the new rivals. However, no one has mentioned the new platform of Enrique Sarasola who decided to combine legal apartments with hotel services. Right now crawling, the illegal holiday apartments may pose a serious threat to urban and beach establishments, belonging to large chains, boarding houses, hostals and independent hotels.


Original article: Expansión (by Y. Blanco)

Translation: AURA REE