Post-referendum, Barcelona hotels face revenue decline

Barcelona

Following its declaration of independence on Friday, Catalonia remains in a "state of heightened tension" that could negatively affect tourism and hotel revenue. 

Catalonia, aided by the popular business and leisure destination of Barcelona, generates a fifth of the country's $1.31 trillion GDP, and attracts 17 million tourists each year. 

On Friday, Madrid stripped Catalonia of its autonomy and removed Catalan leader Carles Puigdemont from office. Spain's chief prosecutor Jose Manuel Maza has said that his department will present accusations of rebellion, sedition and misuse of public funds against the members of the Catalan government. Madrid has also called for the Spanish constitutional court to revoke Catalonia's unilateral vote for independence.

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Barcelona's Hotels

In the face of this conflict, the city’s hotel association distributed letters to guests saying that life is carrying on as normal. The association may have good reason for concern. Preliminary data from STR shows that Barcelona hotels reported substantial performance declines following the October 1 Catalan Independence Referendum.

RevPAR in the market dropped considerably during the first five days after the referendum, with the sharpest year-over-year decline (-27.5 percent) on October 4. 

Prior to October, the market’s hotel performance was strong despite the 18 August terror attack and ongoing protests leading up to the referendum. Barcelona posted its highest ever RevPAR level for both the month of August (€146.11) and September (€140.75), experiencing double-digit increases compared with the same two months in 2016. 

Occupancy levels dropped for six of the seven days after the August 18 attack, but quickly recovered beginning on August 26. STR analysts noted that August hotel performance was lifted substantially by the ESC Congress (August 26-30), the world’s largest cardiovascular congress, which typically hosts around 30,000 attendees. The Sants-Montjuic submarket, which houses many hotels near the host exhibition center, posted a 17.6 percent increase in ADR during the August 1 to October 16 period, and was the only submarket in Barcelona to record an increase in occupancy (+0.4 percent) for that date range. 

“Hotels in the market have been experiencing cancelations from the Group segment (bookings of 10 or more at once) since the beginning of October,” Javier Serrano, STR’s market manager for Spain and Portugal, said in a statement. “Barcelona’s performance has slowed down since the political unrest commenced. This will likely have a directly negative impact on occupancy levels for the rest of the year, which will probably also affect ADR levels in the following months. As we enter 2018, the market will also face a high basis of comparison with this year, which has seen 15.1 percent RevPAR growth through September.” 

Barcelona Development

Earlier this year, Barcelona’s authorities declared a moratorium on hotel development, with the city a focal point for protests over the impacts of mass tourism. Sharing platforms have also been limited as local residents fear being priced out of the residential market.

The transactions market remains buoyant, with the summer seeing AXA Insurance Companies acquire a 55-percent stake in the Hilton Diagonal Mar Hotel in central Barcelona from Iberdrola Inmobiliaria for €80 million.

As of mid-September, it seemed that referendum vote had not impacted demand from investors. "We have not seen signs of investors putting the region on hold so I would say that, up to date, doesn’t look like this question is having an impact and the interest remains the same," Inmaculada Ranera, director general, Spain and Portugal, Christie & Co., said at the time.

The city was one of the top-performing hotel markets in Europe in 2016 recording a year-on-year profit increase of 9.6 percent, which was driven by a 6.7-percent increase in RevPAR (Revenue per Available Room) to €165.35, led by a 7.1-percent increase in achieved average room rate. 

But with visitor numbers dropping, hotel deals in Barcelona may grind to a halt as investors wait to see if they will still be signing contracts under Spanish law—or under the rules of a new country.

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