Investment in Spanish hotels surges

Investment in Spanish hotels surges

Investment in Spanish hotels surges

Foreign investors have been aggressively investing in Spain’s hotel sector, keen to cash in on the positive trend in two key industries: real estate and tourism. Property investment is continuing the recovery that begun in early 2014 and is on track to beat its pre-crisis peak.

And it’s not just the residential sector that investors are targeting, but also commercial real estate in the big cities like Madrid and Barcelona, as now affordable assets go on the block.

Against a backdrop of low interest rates, investors are looking for other ways to make their money work and have become aware of the ability of hotels to lever on economic expansion. And where better to do this than Spain, where GDP growth is set to rise by up to 3.3 percent in 2015, outpacing its eurozone partners. Add to the mix a consistently high number of international tourists, which is driving substantial hikes in hotel revenues and profitability.

Investment in existing hotels and in buildings under refurbishment totalled 1.237 billion euros in the nine months to September, up 52 percent from a year earlier, according to consultancy firm Irea. Spanish hotel investment is on course to exceed 1.6 billion euros this year.

SOCIMIS HELP FUEL HOTEL INVESTMENT BOOM

Socimis, listed real estate investment trusts offering signifcant fiscal advantages have been the protagonists in the hotel investment business over previous months. They have become the preferred modus operandi for large international investors in search of high yields. One such Socimi is Hispania, in which multimillionaire George Soros has a stake.

Hispania and Spanish hotel chain Barcelo joined forces to set up the first Socimi focused on hotels, targeting the vacation market.

Resort areas like the Canary Islands and the Balearic Islands are expected to benefit from improving domestic leisure demand as consumption recovers.

PRIVATE INVESTORS ON THE PROWL

Private foreign investors have also been active in the sector. Recent transactions include the purchase of Madrid’s emblematic Ritz Hotel by Asian hotel group Mandarin Oriental in a joint venture with Saudi Arabian multinational The Olayan Group.

Canadian luxury hotel group Four Seasons has already committed to opening its first hotel in Spain as part of the so-called Canalejas project – an urban development in the heart of Madrid. Then in Barcelona there is also the conversion of the city’s most iconic building, the Agbar Tower, into a 5-star Hyatt Hotel.

While Madrid’s hotel market is further behind in recovery than Barcelona, profitability has increased 17 percent year-on-year over the last 12 months, according to CBRE Research. There also remains a considerable hotel yield premium for Spanish cities compared to other key European markets, the consultancy firm said.

For information on investment and legal services in Spain, please contact corporate law firm Argali Abogados.

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