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.” Regulation
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