The sun continues to shine on hotel investment

bedroom bwHotel investment in Spain reached 2,184 million euros last year with 1,317 million euros coming from abroad. This represents 67 per cent of the total figure.

According to Irea, a financial advisor specializing in real estate and hotels, all this points to Spain consolidating itself as one of the leading destinations for hotel investment in Europe. It is even expected to outperform France and the UK.

Breaking down the investment in Spain, France was the leader, putting in 628 million. They were followed by Turkey with 180 million, then Germany with 149 million. In a change to previous years, there was no participation in this sector from oil producing countries.

WHY SPAIN?

Miguel Vázquez, managing partner of the hotel division of Irea believes the buyer appetite for opportunity funds will remain extraordinary, saying, ‘We foresee a very active 2017 in the sale of debt portfolios. It is a fishing ground where investors will come long term.’

It has been noted that the growth of foreign visitors to Spain, married to an increase in national tourism, has been a reason for investor confidence. Jorge Ruiz is the national director of Hotels of CBRE and he says, ‘A large mass of tourists have moved from other areas to Spain and domestic markets are recovering. And with operating results growing, that attracts the investment market. Spain presents yields difficult to find in other countries.’

A lot of this optimism is down to prime holiday destinations. Not only Madrid and Barcelona, but also cities such as Bilbao, Seville, Valencia and Malaga.

The most attractive areas for hotel investment in 2016 were Madrid, the Canary Islands, Barcelona and the Balearic Islands. Between them they received 67 per cent of the final total. Madrid’s balance sheet showed it brought in 574 million Euros in investment – 26 per cent of the total. The Canary Islands attracted 17 per cent at 377 million, Barcelona 13 per cent at 299 million and Balearic Islands 11 per cent at 247 million.

BUILDING FOR THE FUTURE

The foreign investment of 67 per cent is practically double what we have seen in recent years. In 2015 such investment in hotels accounted for 36 per cent while the year before it was at 30 per cent. One explanation for this rise, according to Irea, is the significant fall of hotel investment in the UK after the Brexit vote. By July 2016, Price Waterhouse Coopers said investment in the UK hotel market had fallen 70 per cent on the previous year.

While the figures for 2016 have not built on 2015 and indeed represent a fall off of 16.5 per cent, that particular year was described as stratospheric by Miguel Vazquez. This is because there were a lot more opportunities on the market during that period as the sector continued to recover. Of last year’s results, he says they are ‘a symptom of stability and speak of a good moment in the Spanish market.’

A notable building in the developing story of Spanish hotels is Edificio España. Despite being a flagship building of Madrid at the iconic location of Plaza Espana, it has been in disuse for many years. During the summer its owner, the Chinese group Wanda which bought the property in 2014, reached an agreement with Baraka to sell the property for 272 million Euros. Baraka is now in negotiations with the Hard Rock chain to turn it into a luxury hotel.

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

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