21st July 2024
Skyline of Barcelona. (Vicente Zambrano González)
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Spanish hotels are catching the eye of international property investors

Latest: Coronavirus in Spain figures (30 Apr)

There has been a flurry of interest in Spanish hotels from international real estate investors in recent weeks, attracted by the opportunity to acquire relative bargains in resorts that have been hit hard by the Covid pandemic over the last 12 months.

Many owners, however, are reluctant to sell, as they hang on to their businesses with financial support from the government, keen to see out the current crisis and be well placed to benefit from a buoyant market when international travel resumes.

In the pre-pandemic years, many hotels in Spain had experienced a lengthy boom period and had benefited from the increasing numbers of international tourists visiting the country each year.

When Covid hit, tourism in Spain took a battering, with an 80% reduction in tourist numbers during 2020. Until then, Spain had become the world’s second most visited country.

With the current pandemic restrictions impacting on deflating property prices and the potential to return to pre-pandemic revenues when restrictions are lifted, the Spanish hotel sector has caught the eye of international real estate funds, who appear to be keen to invest now to take advantage of potential opportunities.

However, many owners have so far been reluctant to engage in deals and are riding out the current storm whilst planning a return to high occupancy levels and revenues post-Covid. This contrasts markedly from the last property crash in 2008, when many hotel owners were forced to sell.

Skyline of Barcelona. (Vicente Zambrano González)
Skyline of Barcelona. (Vicente Zambrano González)

The government’s support for businesses within the tourism and hospitality sectors has enabled hotel owners to survive the last 12 months and prepare for future trading to increase to pre-pandemic levels over the next couple of years.

Recent data shows that companies within the tourism sector have received the most state-backed loans of about 17 billion euros, and 115,000 hotel workers are currently on the government’s ERTE furlough scheme.

But there are some property deals on the table and that are expected to complete in the weeks ahead. Some reports say that property wealth managers are expecting sales in Spain of around 900 million euros, including the Selenta Group, a hotel chain that owns the five-star Hotel Don Carlos in Marbella.

Selenta had recently sold its Nobu branded hotel in Barcelona to a German property fund, ASG, for 90 million euros.

Many European countries are attracting the interests of property investors, but Spain appears to be the most appealing, with interest from investors currently focusing on the four-star hotel market with more than 100 rooms on the Catalan and Andalusian coasts, along with the Canary and Balearic Islands. All are seen as ‘the sweet spot for European tourism’, according to Javier Arus, head of hospitality for hotel investment fund Azora.

Currently, demand from investors outweighs supply of hotel properties, but if tourism levels don’t pick up at the rate that is hoped for in the months ahead, then investors may start looking at other sectors for their investments.

The next few months are crucial to Spain’s tourism and hospitality sectors, with hopes of an increase in international tourism returning later in the summer. Last year, tourism only reached 20% of 2019 levels and it is hoped that this figure may increase to 60% in 2021.

The success of the vaccination programme will directly impact on these estimates and also whether the interest of international property investors in Spain’s hotel sector will diminish.

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