Hotels provide a barometer for economic growth

Hotels provide a barometer for economic growth

The hotel market is proving a strong indication of continued economic growth in Spain with Madrid leading the charge.

A simple look at occupancy rates shows how well the sector is doing. RevPAR, otherwise known as revenue per available room, was up 17.9 per cent in 2015 compared to 2014. This can be seen in an even more favourable light when it is considered that, on average, €9 was added to room rates.

Recently released figures for the first quarter of 2016 show that 2.2 billion euros was invested in property with the most sought after being retail, hotels and offices. This has led to a projection of 8 billion euros for the year. While this would be considerably down on the record investment of 11.7 billion seen last year, BNP Paribas Real Estate believes that the lower projected figure doesn’t indicate a lack of a attractiveness in the sector. Instead, they say is it because not as many properties have been available as in recent years as there were high levels of acquisition in the recovery time of 2014. BNP calls the new figures a correction of the pace.

Adrien Blanc, chief investment officer of Eurosic in France believes there are clear signs of sustained recovery in Spain and credits this mostly with tourism and exports. He says, ‘We believe Spain has a competitive advantage that will continue driving the touristic demand higher in the future…As a matter of fact, investment and demand for hotels is already showing higher growth rates than other assets in the last few months.’

Carlos Quiroga, senior vice president of LNR Partners in Spain adds, ‘The hotel sector presents a clear investment opportunity with Spain remaining one of the major tourist destinations worldwide.’

GETTING A PIECE OF THE ACTION

Indeed, investors are looking upon the sector quite favourably and there have been some notable acquisitions recently demonstrating the fact. One of the highlights of 2015 was the sale of The Ritz, Madrid, bought by a partnership comprising the Saudi Arabian Olayan family and Mandarin Oriental who will run the hotel. Together, they paid €130 million for the business.

Another is the sale of the Hotel Villa Magna, which was put on the market last Summer by the Portuguese family Quieroz Pereira. The Dogus Group of Turkey swooped and took it for what is believed to be €180 million. The hotel is located in the prime commercial real estate area of Paseo de la Castellana and is considered to be one of the most luxurious hotels in Spain.

During the first three months of this year, a total of 37 deals were made. The aforementioned sale of the hotel Villa Magna is cited as the second most significant piece of business in the sector in the first quarter. It is beaten to first place only by the sale of Eroski hypermarkets to the fund IVESCO for €358 million.

DIVIDING THE SPOILS

Madrid is currently the leader in Spanish property investment with a 41 percent share in all activity. Following up are the Basque Country and the Canary Islands, and then Catalonia, which previously occupied the second spot. However, Barcelona remains an attractive investment centre with prime assets on the market.

Against all this, BNP Paribas Real Estate believes that rents for all types of properties will continue to grow at a moderate pace indicating an upward momentum in the Spanish economy.

For more information on investment opportunities, please contact corporate law firm Argali Abogados.

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