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February 12, 2018

Well renowned as a popular holiday destination, Spain’s hotel investment market enjoyed a bumper year in 2017, overtaking Germany as the second-most liquid in EMEA (Europe, the Middle East and Africa).

And as the country’s tourist sector expands, investors are paying closer attention to the European hotspot with increasing opportunities – particularly in resorts – set to further boost the market in 2018.

In 2017, the number of international tourists visiting Spain improved for a fifth straight year. The country attracted 82 million tourists, making Spain the world’s second-most visited country after France and push the United States into third place. Tourist spending has also hit a new record in 2017, rising 12.4 percent in the year from 2016.

And, investors followed suite. Throughout 2017, investment in the country’s hotel market reached €3.6 billion (US$4.5 billion), 65 percent higher than in 2016, driven by both single asset and portfolio transactions.

RevPAR (revenue per room) also climbed 8.8 percent to €85.29, according to STR Global.

The country’s occupancy and average room rates were well above its long-term averages and growth is expected to continue in 2018, with Barcelona and Madrid projected to deliver a RevPAR growth of 5.2 percent and eight percent respectively, according to PwC figures.

But as tourist numbers increase, individual cities are starting to enforce restrictions. Barcelona recently passed a law to limit the number of beds on offer and imposed a moratorium on building new hotels to curb tourism as visitors heavily outnumbered residents. Restrictions such as this will further boost the market as demand starts to push prices higher.

Who’s buying?
Both domestic and international investors are being drawn to Spain’s “improving economy together with impressive hotel operating performance and a booming tourism industry,” says Patrick J Saade, Co-Head of European Transaction’s for JLL’s Hotel and Hospitality Group, adding that Spanish resorts should be an area of focus for investors as many are in need of refurbishment, allowing the opportunity to renovate and sell at a higher price.

International investment accounted for half of Spain’s hotel transaction volumes in 2017, with half of those investors coming from within Europe. North American buyers followed closely, making up another 40 percent. The Canary Islands remained the favourite destination, at €939 million or 27 percent of total volume.

Major international investors such as Fonciere des Regions, Area and Batipar have been playing an increasingly prominent role in the Spanish hotel investment market, says Gilda Perez-Alvardo, Head of the Global Hotel Desk for JLL’s Hotel and Hospitality Group. “These investors tend to hold their investments for an extended period, providing stability and depth to the market.”

The largest hotel transaction last year was Blackstone’s acquisition of Hotel Investment Partners’ portfolio of 14 hotels with 3,700 guest rooms for €630 million from Banco Sabadell. Spain’s major banks such as Banca Sabadell, Santander and BBVA have taken the lead to help facilitate real estate transactions due to the volume of real estate assets they control.

Socimis have also been active in the hotel market. Hispania, the Socimi managed by Azora, purchased seven hotels from British private equity firm Alchemy Partners for €165 million and a 24 percent stake in the Grupo Barcelo for €230 million.

Other transactions include the sale of Edificio España to Riu Hotels & Resorts for €136 million and the Wave portfolio—comprising four hotels in San Antonio, Palma Nova, Puerto Del Carmen and Torremolinos, —by London & Regional Properties.

Looking forward, as the market matures and local operators mutate to operating partners, Saade expects to see a more diverse universe in Spain.

NH Hotels might be the next in line on the M&A list as China’s HNA is seeking to sell its 30 percent in the company, according to Reuters. The stake is valued at around €632 million. NH Hotels had previously declined a takeover offer by rival Barcelo, a deal that would have created the country’s largest hotel chain. NH Hotels had said it wanted to analyse future strategic possibilities.

Click to read more about hotel investment.

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Patrick Saade

Co-Head of European Transaction’s for JLL’s Hotel and Hospitality Group

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