STR & Magma HC: Hotel Investment Continues to Rise in Spain

2 August 2018 – Hosteltur

The Spanish hotel industry has increased its interest in investment due to the strong growth in yields in several markets, and despite the fact that the political scenario in Cataluña has slowed down the performance of the country as a whole. That is according to analysts from STR and Magma HC, who explain that the investment boost has been largely driven by the strength of international demand, even during the financial crisis.

“The increase in holiday tourism, as well as in ‘bleisure’ (business with leisure tourism) has opened the market to numerous development opportunities, with several operators currently working on improving their products and services to satisfy the growing demand”, says Albert Grau, founding partner at Magma HC. Thus, in his words, the Spanish hotel sector “is continuing to boom, despite the challenges ahead”.

In this sense, it is worth remembering that, between March 2015 and March 2018, Spain registered 37 consecutive months of RevPAR (revenue per available room) growth. In recent months, by contrast, there have been marginal decreases, above all due to the slow down in Barcelona, which is home to the largest number of rooms in the country. Even so, according to data from STR, in most of the key domestic markets, including in Madrid, hotel yields are continuing their strong upwards trend.

“Vacation markets, primarily Gran Canaria, have experienced YoY decreases because tourist demand has returned to rival destinations such as Turkey and Egypt”, says Javier Serrano, manager at STR for Spain.

Barcelona

STR’s study shows that, in general, hotels in the Catalan capital have managed to keep their tariffs more or less stable, although there have been more notable decreases in recent times. Following the independence referendum last October, the occupancy rate of establishments in Barcelona fell considerably. During the first half of 2018, they fell by 5.2% with respect to the same period a year earlier, whilst the ADR (average daily rate) fell by 1.4% compared to 2017.

“Although it is still too early to make any kind of prediction about what will happen in the market in the end, it is likely that Barcelona will recover quickly once the situation stabilises”, says Serrano. “Hotels in Barcelona”, he adds “saw constant monthly RevPAR growth rates in the double digits in 2016 and 2017, when the market was still benefitting from strong international demand and demand diverted from destinations such as Turkey and the north of Africa. The recent instability in Barcelona slowed down those previous growth rates, with decreases in occupancy rates driven by the decrease in domestic and international demand, mainly from the USA. Nevertheless, if the market manages to keep tariffs stable, we should see growth to the extent that consumer confidence returns to Barcelona”.

Madrid

Madrid, with the highest RevPAR growth rate in all of Spain in 2017, has benefitted over the last three years from demand due to leisure and corporate business. As well as being one of the main weekend destinations for Europeans, it has also seen an increase in interest from several Asian countries and the USA, especially when it comes to group reservations (…).

The Director-General of STR, Robin Rossman, believes that “there is enormous potential for Madrid’s hotels to continue pushing up rates”. In his opinion, “to the extent that demand continues to grow and the hotel supply market continues to evolve with the arrival of more high-end properties, we can expect to see increases in the ADR”.

Overall, the analysts at STR expect that corporate demand in Madrid will continue to increase thanks to the celebration of international events and the relocation of the headquarters of several companies from Barcelona to the Spanish capital. As such, they forecast ADR growth of close to 3% in Madrid by the end of 2018.

Original story: Hosteltur

Translation: Carmel Drake

JLL: Hotel Inv’t Reaches Almost €5,000M In 2 Years

11 January 2017 – El Independiente

The tourist boom (which saw record numbers of tourist arrivals and a recovery in demand from Spanish clients) was followed by a boom in the hotel sector (with record occupancy rates and tariffs); and both have been supported by a boom in investment in hotel properties. With tourist activity at record highs and no signs of a slow down in sight, the purchase of hotel buildings has become a cushy deal for investors.

In two years, real estate investment in hotels in Spain has amounted to almost €5,000 million. Following a historical record in 2015, when operations were closed amounting to €2,650 million, last year, transactions were signed amounting to €2,155 million, the second best year ever, according to the latest report compiled by the consultancy firm JLL Hotels & Hospitality Group.

Several major operations have sustained the pace of investment. Just before the end of 2016, Merlin Properties sold off its hotel portfolio, transferring it to the fund Froncière des Règions for €535 million. The sale of the hotel Villa Magna de Madrid by Sodim SGPS to Dogus Group for €180 million represented a new national record in the price paid per room (€1.2 million per room, compared to €800,000 per room in the case of the Ritz in 2015, which had held the record since then).

Other large transactions included the sale by AXA Investment Managers of the Pullman Barcelona Skipper Hotel to Shaftesbury for €93 million; and the purchase of the historical headquarters of Caja Madrid by KKH Capital Group and Perella Weinberg RE for €80 million, which it will convert into a luxury hotel.

In total, investors purchased 130 hotel assets in Spain last year, in addition to the 143 hotels that they bought during the record year of 2015. Madrid led the ranking as the main location for investment, accounting for 28% of the total volume with €597 million. It was followed by Barcelona with €344 million (16%), despite the hotel moratorium declared by Ada Colau’s Town Hall, and Las Palmas (7.4%), Fuerteventura (7.4%), Málaga (7.4%), Valencia (7%) and Mallorca (6.1%).

Investments funds take over from the Socimis

During 2015, the major stars of the hotel investment segment by far were the Socimis (…), which accounted for almost €1,000 million of transactions during that year. But they have been replaced by investment funds, which have become the major players in the hotel investment market, accounting for 51.5% of total volumes.

The investment funds that have accounted for most of the transaction volume have been: Foncière des Régions, with 19 hotels and a total investment volume of €535 million; HI Partners, which has purchased eight assets for €200 million; KKH Capital Partners, which together with Perella Weinberg RE, bought the Celenque building for €80 million; and Internos Global Investors, which purchased Hotel Innside Madrid Suecia for €45 million.

According to JLL’s forecasts for 2017, the hotel investment market will continue to be active and investment volumes will remain similar to those seen in 2016, thanks to interest from international investors. The consultancy firm thinks that the requirement for owners to continuing to reduce the debt on their balance sheets, the strengthening of the strategy by national hotel chains to sell off properties and continue to operationally manage establishments, and the strong outlook for the tourist sector in general place the Spanish hotel market in the investor spotlight.

Original story: El Independiente (by David Page)

Translation: Carmel Drake