The Hotel Industry Warns That A Moratorium Could Discourage Investment In Madrid

13 February 2016 – Expansion

City occupancy Level audit ordered by the mayoress, Manuela Carmena, threatens to jeopardize the recovery of the sector and drive away investors.

The hotel industry stands up for the potential of Madrid as a tourist destination and warns that if the occupation audit ordered a few days ago by the city council derives in a moratorium, it will drive away foreign investment.

The industry welcomes the initiative of the Mayoress, Manuela Carmena, provided it is addressed to make sense of hotel supply growth, which is experiencing a boom of new projects in the last months after several years in dry dock. 
This is precisely what chains and investors reproached Ada Colau, its counterpart in Barcelona, when she decreed the suspension of ongoing projects last summer.
But if the audit is a prior step towards a moratorium similar to that of Barcelona, the opinion is also unanimous. It will suddenly dissipate the interest of domestic and foreign investors after a record year in which Madrid beats Barcelona as top destination in the urban segment, with EUR 589 million in transactions. 
This interest is still held at the start of 2016 although investment growth usually lowers in the first months of the year “Madrid is still a preferred investment objective, ahead of Malaga, Valencia, Seville, Bilbao and Barcelona, where having a hotel means having a treasure, but behind holidays hotels, where there is a genuine investment fever,” says Miguel Vazquez, partner in charge of hotels at Irea consulting company. “The investment market is not as it ended in 2015 but not for a lack of interest, but lack of product,” agrees Inmaculada Ranera, CEO of Christie & Co. However, there are factors that cast uncertainty. On the one hand, the political context and the formation of the new government. And, secondly, the give and take between the city of Madrid and Dalian Wanda on the rehabilitation of Edificio España.

In the sector they suggest that the decision of the Chinese investor, who has hired JLL to find a buyer for the property, could not be definitive but a simple negotiating tactic, although they admit it has created legal uncertainty. 
At the moment, the risk is limited and most investors are still looking for good deals, although more carefully. The roadmap established by Carmena and her team once the report on their hands could nonetheless reverse this situation. In the sector it is believed that a moratorium would paralyze the recovery of Madrid as a destination. And above all, they argue that it would be an illogical measure. 
”Colau had it on her political program, but Carmena did not have it”, said Miguel Casas, Head of CBRE Hotels. 
Madrid – hotel company heads say, does not have the pressure suffered by Barcelona due to the boom in tourist apartments and what it needs is more international visitors. In Barcelona these represent 80% of the total; in Madrid, they are below 50% -. According to Luis Arsuaga, executive vice president of JLL Hotels, “if revenues per room or tariffs came down, it would make sense to think about it but, on the contrary, the occupation is getting better and better.” 

In this line, say hotel companies, more hotel space and foreign brands, a coordinated tourism promotion between City Hall and Community and – above all, the illegal supply to be regulated and not to limit the private sector is what is really needed. According to Irea, there are 22 ongoing projects totaling 6,000 hotel places and an economic impact of EUR 145 millioN which could be affected by a sudden moratorium like that of Barcelona. Among them, for example, projects to convert the former headquarters of Caja Madrid and the building that houses Café Berlin into a hotel; or the expansion of Asturias Hotel. 
Moreover, according to these estimates, each hotel place in Madrid generates 24,155 direct and indirect Euros and 22 jobs are created per 100 spaces. Since 2008, the number of stays increased by 2.5 million, which has resulted in an impact of EUR 380 million. 
Apart from the withdrawal of the investment, a moratorium would “create a bubble like the one Barcelona is living, soaring the value of operating hotels and tourist accommodation,” says Bruno Hallé, Magma HC partner.

Original story: Expansion (by Yovanna Blanco)

Translation: Aura Ree

Hotel Investment Reaches 1.1 Billion

02/01/2015 – El Mundo

Investment in the Spanish hotel sector has reached 1.1 billion euros, according to a JLL Hotels & Hospitality Group report, which states that economic recovery and increasing confidence among international investors have caused investment levels to soar in Spain.

The year will be remembered as one of the best in the last 20 years in terms of hotel investment in Spain and the odds are high that 2015 will show a similar or even better performance.

The phenomenon finds reflection in such deals as the Edificio España building, Madrid, which is set to house a high-end hotel and apartments, as well as a retail area. Another example makes the Deutsche Bank property located in Paseo de Gracia street, Barcelona, chosen by a multi-national brand for opening a luxury establishment.

Over the year 2014, investment targets have changed, looking mostly to holiday spots and secondary cities. To illustrate, in 2013 the beach & sun properties accounted for 18% of all deals and in 2014 they reached a 34% share. Not shy at all, the smaller cities boosted their popularity from 8% to 12% if compared to the previous year.

Finally, prime cities like Madrid or Barcelona concetrated 54% of the total investment in hotels, while in 2013 they accounted for one third of all transactions.

The report underlines high dispersion of the hotel deals seen across the country in cities like Valencia, Cordoba, Alicante, Huesca, Cadiz, Caceres or A Coruña.

Not only the change in preferable places has been noticed but also in origins of the investors. Many wished to expand their portfolios and obtain significant returns from consolidation of such markets as Barcelona or Majorca, or the better outlook for the industry displayed for Madrid, Marbella or Valencia.

Among the 2014 most important investments, we find the Intercontinental establishment bought by Katara Hospitality, abovementioned Edificio España in Madrid sold to Chinese group Dalian Wanda and the Deutsche Bank building acquired by a joint venture of KKH Capital Group and Perella Wienberg Real Estate. Furthermore, noteworthy were the sales of the old Banesto headquarters to Pontegadea, the Hotel Renaissance in Barcelona to QAFIP, the Blau Mediterraneo to Hipotels, and the Majorcan Hotel Valparaiso Palace bought by GPRO.

Apart from the purchases metioned before, Madrid saw its another jewel, the Asturias, changing hands in 2014.

Asian Buyers Warming to Madrid & Majorca

Asian investors were the main players in 2014, snatching the Spanish properties from under the European and the Arab noses.

Spanish buyers have increased their share from 49% to 58%, partly because of the Socimis (REITs), especially Hispania.

Private equity firms accounted for 10% more than the previous year, boosting the percentage from 1% to 11%. For example, Cerberus and Orion Capital bought the Sotogrande complex including two hotels.

Also, the real estate companies raised their share from 20% to 30%, while investment funds and private purchasers reduced their contribution. Hotel operators´ investment practically stagnated.

Original article: El Mundo

Translation: Aura REE