Spain's hotel investment reached record levels in 2017

The Westin Palace, Madrid, Spain. Photo credit: Marriott International.

Hotel investment in Spain reached a record €3.9 billion in 2017, beating the previous record of €2.6 billion that was set in 2015, according to the Insights on the Hotel Investment Market in Spain 2017 report. 

This investment spanned both operating and converted hotels. 182 hotels changed hands in the country last year, compared to the 147 hotels sold in 2016. Average price per room also rose last year to approximately €119,000—a 30-percent increase from the average recorded in 2016.

The success Spain's tourism industry saw last year contributed to increased investor interest. A total of 82 million overseas travelers visited Spain—a rise of almost 10 percent from 2016. Investments in property conversions into hotels and land sales increased 139.8 percent year-over-year to €478 million in response. 

Resorts vs. Urban Hotels

Most of the investment was in the resort sector, which experienced a 69-percent increase, outperforming the urban sector, which rose 31 percent. Hotel resort portfolio sales made up 86 percent of the total guestrooms changing hands in 2017. Meanwhile, 12 portfolios with 13,008 guestrooms were sold last year, including Blackstone's acquisition of HI Partners, Hispania's purchase of Barcelo's stake in Socimi Bay and London & Regional's four-hotel Sol portfolio buy from Starwood Capital. 

Investment was more widely distributed last year, as investors regained interest in destinations facing economic crises. For example, investment in Malaga accounted for 15 percent of the country's total at 18 hotel sales totaling €516 million. However, the Canary Islands remained the top investor destination with 27 percent of Spain's total investment volumes at €939 million in investments. Madrid claimed the lead again for urban investment with €637 million in purchases of existing hotels and conversions. Barcelona followed Madrid with investments totaling €422 million.
 
International investment played a major role in the country's feeder market growth last year. Overseas acquisitions accounted for more than 60 percent of investments at €2.3 billion. Investment funds made 49 percent of these deals, despite dropping investment in REITs to 12 percent. 

What's Ahead

The hotels division at financial real estate consultancy Irea expects that hotel investments will remain high this year, although the uncertainty brought on from the unrest in Catalonia may prevent Spain's investment from reaching the totals gained in 2017. "As in 2017, this year has started with a considerable number of deals in the latter stages of negotiation, which, if completed, could produce €600 million of investment in the first quarter of 2018," Miguel Vazquez, partner of the hotel unit at Irea, told Property Magazine International

Rising international investor interest and capital on hand is expected to push hotel owners to dispose of their properties. This is especially true for family-owned hotel companies, whose heirs don't plan to continue the business.