IHIF's City Scene: Madrid Market Update


Spain's economy has been much maligned in recent times, a high unempolyment rate serving as a flashpoint of ire. But the country's fortunes are in the midst of propitious change. Spain's economy reportedly expanded by 3.5 percent in the fourth quarter compared with a year earlier, propelled by a bounceback in consumer spending. For the full year, the economy expanded 3.2 percent.

At the heart of it all is the country's capital city of Madrid, a simultaneous hub for finance and culture that is a draw for corporate and leisure travelers, alike. In Part III of JLL's and IHIF's City Scene series, we put Madrid under the microscope. You can find our market looks of London and Berlin here and here.

The Scene
Madrid is the economic, financial and administrative hub of Spain, and boasts a vast cultural and artistic heritage. First and foremost, the city remains a business destination, but due to its seemingly limitless cultural attractions, it is also establishing a reputation as a major international leisure hot spot. As a result, tourist arrivals grew 6 percent to 8.9 million in 2015, while the number of bed nights reached 17.8 million—an 8-percent uplift.

Down To Up
Hotel performance suffered considerably during the Spanish recession, but has experienced robust growth in recent years. In 2015, the city reported strong occupancy growth, while average rates rose by €9. As a result, RevPAR growth reached the high teens, up almost a fifth year-on-year, fuelled by economic recovery and off the back of weaker performance in 2013 and 2014.

In terms of hotel supply, there are currently around 440 hotels offering a total of approximately 47,000 rooms. There are almost 2,000 rooms in the immediate pipeline, all expected to enter the market by the end of 2016.

Deal Uptick
Strong hotel performance results have helped to restore confidence in Madrid’s hotel market and fueled growth in hotel investment. During 2015, Madrid continued to experience an increase in hotel transactions similar to the prior year. Both international and domestic investors perceive Madrid as a domestic business hub and international leisure destination, providing good investment opportunities. In 2015, JLL advised on the €130-million sale of The Ritz Hotel Madrid on behalf of Belmond Spanish Holdings S.L.U and Omega Capital to a joint venture between Mandarin Oriental International and the Saudi Arabian Olayan Group.


The Last Word
Luis Arsuaga, Head of Hotels & Hospitality in Spain & Portugal, JLL commented: “Hotel supply in Madrid is constantly growing and the interest by international hotel brands, such as Mandarin Oriental and Four Seasons, confirms Madrid’s reputation as a strong tourism destination. However, the market will remain dominated by domestic hotel management companies for the foreseeable future.

“The macro-economic environment in Spain will continue to push domestic demand, while the weakening of the Euro, coupled with favorable economies in feeder markets will continue to attract international visitors.”

For more information on hotel investment markets across EMEA, visit www.jll.eu/hotels-intelligence-hub.