Spain’s Hotel Sector Stronger

Spain’s real estate market continues in its downward spiral, but hotel properties are doing better at retaining their value than other kinds of real estate. The country has …

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Spain’s real estate market continues in its downward spiral, but hotel properties are doing better at retaining their value than other kinds of real estate. The country has entered into a double-dip recession, which may have helped contribute to more tourism as prices for amenities drop. Even so, hotel property markets are performing differently across the country, as evidenced in a comparison between Barcelona and Madrid. Barcelona’s hotel market has managed to retain value better than Madrid, and international investors looking for distressed property deals are taking notice of the differing trends. For more on this continue reading the following article from Property Wire.  

The Spanish hotel property market has proven to be resilient when compared to other economic sectors, despite the country falling into a double dip recession, it is claimed.

Interest for well located properties in Spain is still high, with international investors keeping their eyes on the country’s main cities and waiting for distressed opportunities that offer high performing assets at affordable prices.

However, an analysis report from property consultants Jones Lang LaSalle indicates that the two main city markets of Barcelona and Madrid are performing differently.

In Madrid economic difficulties have negatively impacted hotel performance in 2012 as weakening corporate demand has led to drop in occupancy across the market causing a RevPAR decrease of 3.7%.
 
In Barcelona, despite the Eurozone crisis that started mid-2011, the city managed to obtain good operating results for the whole 2011 and trading performance results for 2012 resulted in RevPAR improvement of 7.6%, when compared to 2011.

The report says that the resilience of Barcelona’s hotel industry is a result of the growing popularity of the city among international tourists who accounted for 84% of total bed nights in 2012, cementing Barcelona’s strong position as a leading tourist destination.

With two years of consecutive RevPAR increase, Barcelona remains at the forefront of the Spanish hotel industry and together with Madrid, the main target for any international investor. Madrid continues to be a top priority for international operators and investors within Spain where there remains significant interest from international brands to enter a market which is still dominated by national players.

 

‘In Spain transaction activity will likely remain weak as investors face higher risks as the recession in Spain continues in 2013, with investment volumes likely to be similar to 2012 at circa €400 million,’ said Luis Arsuaga, national director for Spain & Portugal for the Hotels and Hospitality Group at Jones Lang LaSalle.

‘We expect many international investors to follow a wait and see approach and focus on key tourist destinations with strong trading fundamentals such as Barcelona and Madrid.  Activity in 2013 can be expected from Spanish banks which are under growing scrutiny from the European Union to start deleveraging, which could therefore result in an acceleration of their plans to sell hotel loans and assets,’ he explained.

‘Confidence persists that many of these investment opportunities will offer attractive returns and upside potential, therefore capturing the interest of more opportunistic investors,’ he added.

This article was republished with permission from Property Wire.

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