What makes Spain's hotel recovery remarkable

The new Christie + Co report, "The Keys to the Spanish Hotel Market Recovery," indicates that Spain's "remarkable resurgence of hotel investment" will continue on through 2016, at least.
Spain has seen record-breaking levels of inbound tourism in 2015 (so far), following four years of consistent growth. More than 38 million foreign tourists visited the country in the first seven months of the year, 4.7 percent more than during the same period in 2014.  
This is good news for buyers, with "extensive investments" in existing hotels and new-builds planned for both top-tier cities and secondary markets.

"These new projects are spread over the country in both urban and beach destinations, with 84 percent of new accommodation unit projects concentrated in Barcelona, Madrid, Malaga and the Balearic Islands, and will be positioned in the four-star and five-star segments," Amparo Gómez-Angulo, a consultant at Christie + Co's Barcelona Office and author of the report, told the World Property Journal. "These developments will enable the entry of new international brands currently not represented in our country, such as Hyatt or Four Seasons, and allow Spain to position itself as a more competitive destination by increasing its appeal to a more select international audience with greater purchasing power." (Madrid is set to get Spain's first Four Seasons in the next two years.) 

The improved market has improved the flow of investment from the Middle East and China, Gómez-Angulo added, with recent high-profile sales including the W Hotel in Barcelona to a Qatari fund, and the recent purchase of the Hotel Ritz in Madrid by a joint venture between Mandarin Oriental and the Saudi conglomerate Olayan Group. In June, Colombian banking billionaire Jaime Gilinski reportedly paid €190 million to the Portuguese Queiroz Pereira family for Madrid's Hotel Villa Magna. The price put Madrid's hotel values on par with those in New York and London, surpassing the sale of the Ritz (€130 million) and the InterContinental (€70 million) and is very close to the €200 million paid for the W Barcelona. 

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Most recently, the Spanish management company Cadena Monte reached an agreement with Ilunion Hotels, part of the ONCE business group, to sell the hotel Monte Málaga, according to the Europa Press. Ilunion Hotels, formerly known as Confortel Hoteles, currently has 22 three- and four-star hotels in the primary Spanish cities. Looking ahead, Barcelona's Agbar Tower is set to be converted into a five-star Hyatt Hotel.

Spain's numbers
Spain's GDP growth is set to rise by up to 3.3 percent in 2015, outpacing its eurozone partners, The Corner is reporting. Beyond that, the growing international visitor numbers are driving "substantial hikes in hotel revenues and yields." 

Investment in existing hotels and in buildings under refurbishment reached €1.237 billion 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 this year, according to CBRE Research.

SOCIMIs (sociedades cotizadas de inversión en el mercado inmobiliario)—listed real estate investment trusts—have been some of the protagonists in the hotel investment business over the past months, particularly 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 segment.

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 consultants. Barcelona has tended to have the edge over Madrid in terms of tourism growth and is also considered to have a stronger international brand, which lures big investors. Importantly, there remains a considerable hotel yield premium for Spanish cities compared to other key European markets, CBRE said.

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Hotels that do not restructure will not be able to compete with those that do, and revenues ultimately lag the comp set.