Spain's leisure market expands from the beaches to urban locales

Last week, the Riu hotel chain reached an agreement with the Baraka Group to purchase the Edificio España in Madrid and turn it into the first Riu Plaza urban hotel in Spain. The hotel is expected to open in two years, following completion of a renovation.

The deal is a sign of the growing popularity of urban hotels as Spain’s leisure market expands from the beaches.

After purchasing the Edificio España from China’s Wanda, the Baraka Group sold the property on to Riu Hotels & Resorts, owned by Britain’s TUI Group. 

“It had always been part of our strategic plan to open a Riu Plaza hotel in Spain and this opportunity in Madrid, in such an unbeatable location and emblematic building, surpasses all expectations,” Carmen and Luis Riu, CEOs of Riu Hotels, said in a statement. “After several months, the operation progressed to the point where Riu could buy the building outright, an opportunity that, after examining it in depth, we haven’t wanted to pass up.”

The future Riu Plaza hotel will take up 24 of Edificio España’s 27 floors, with 650 rooms, while the rest will be given over to retail, led by The Baraka Group. The hotel will also have more than 19,000 square feet of space for events. It will also have two restaurants and a rooftop swimming pool next to the Sky Bar. 

“Riu started looking into the urban market some time ago, and already has hotels in Berlin, Dublin—we sold them the Gresham—and New York,” Inmaculada Ranera, managing director, Spain & Portugal, Christie & Co., said.

“Other companies from the Balearics with ‘vacational’ core business like Iberostar have the same strategy. But I would say that the jump into urban hotels was started by other companies like Melia or Barceló. The leisure segment in urban consolidated destinations is high, so those companies getting into that segment makes a lot of sense.”

Beyond vactioners, the urban hotels bring business travelers to TUI’s portfolio. The Rui Plaza hotels are “located in the center of large international cities characterized by their modern style, functionality and service [that] offers all types of amenities for business, as well as holiday travelers,” Ranera said.

Riu is not the only hotel brand looking to give its profile in Spain a lift. The W Barcelona unveiled a multi-million euro transformation of all 473 guest rooms and suites at the beginning of June in a site that combines urban energy and the relaxed vibe of the beach. 

Looking Up

W is also set to come to Madrid, as the city heads into a period of upscale development. Looking into this year, Horwath HTL said that Madrid’s consolidation as a destination for leisure and business travelers was likely to continue its upward trend. 

“This enables domestic and international demand to consolidate its increase, resulting in substantially improved hotel KPIs,” Horwath’s report claimed. “All signs indicate strong momentum for Madrid's hotel market, with more growth ahead.

“In response to this situation, there has been a significant increase in the number of new hotel projects and transactions in the last year. Madrid's current hotel development pipeline is significant not only for the relatively large number of rooms but also for the nature of some of the planned properties, in particular international branded operators such as Mandarin Oriental, Four Seasons and W, which are expected to boost the city's RevPAR during the following years.”

Madrid, apart from being the capital of Spain, is the financial and administrative center of the country. The city has a pipeline of more than 1,000 guestrooms. 

Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.

Photos courtesy Horwath HTL