The impact of Ada Colau’s moratorium on new hotels

On July 2, 2015, the Barcelona municipal government, led by the newly installed mayor, Ada Colau, declared a moratorium on new hotels and the suspension to carry out any construction in existing hotels located in certain neighborhoods of the city. The moratorium, which was extended in 2016, affects hotels, hostels, B&Bs, rental apartments and all other businesses that offer beds for transient visitors to the city.

The Mediterranean metropolis has seen enormous growth in tourist accommodation throughout the years: from 23,719 hotel beds in 1991, to 37,224 in 2003, and 69,128 in 2013. There are also an undetermined number of unlicensed apartments that are being rented out to tourists through specialized websites such Airbnb.

The concentration of tourists in neighborhoods such as Borne, Barceloneta or Raval have triggered numerous complaints from local residents who find themselves unable to go about their normal lives and rapid increases in rents for apartments as many apartment owners have opted to rent to the lucrative tourist market instead of the long-term local market.

According to Agustí Colom Cabau, the councillor of Occupation, Business and Tourism of the Barcelona city council, their goal is to “… build a city that is kind to the neighbors as well as comfortable for tourists.”

Back in July 2015, when asked about likely reactions from the tourism sector, Mayor Colau said she was convinced she would get their support because “all entrepreneurs want their businesses to be a success and to be able to grow in the long run without risks.”

However, nine months later, the moratorium has stopped 543 million euro in investments, mostly affecting small and medium sized businesses. The Hotel Association of Barcelona is deeply unhappy and is worried about the impact the suspension is having on small and medium business owners, who are now unable to fix their establishments, expand or remodel and their access to capital has been dramatically reduced. Some of them had already gotten loans to improve their hotels and had to stop their plans due to the moratorium. As well, there is evidence that the value of existing hotels has risen dramatically over the last year on the back of a severe shortage of hotel product coming to market.

An example that was showcased in the local newspaper, ¨La Vanguardia¨, is that of a small hotel in the Calle Princesa in the Ciutat Vella district. Years ago, the owners of the hotel bought a building next-door and 30 licences in order to expand their business. After a few years of planning they had everything ready to start construction, but their plans were thwarted when the moratorium was announced. A person involved in the project said, “We are very discouraged. The building is deteriorating, we have to pay the mortgage, worry about squatters … and all of that without generating a single euro”.

Many other hard working business owners find themselves in a similar position. They worry that the restrictions condemn their businesses to stay in limbo. The contents of their business plans don’t count, at all; they simply can’t remodel because the street frontage is too narrow or the rooms don’t have enough square meters. And this lack of certainty and limitation of supply, many warn will imply the degradation of the more modest local establishments to the benefit of multinational hotel companies and real estate investors who can afford to pay high prices to acquire hotel assets. The stage is set for a battle between the forces of the market and an artificial barrier to entry with the future of Barcelona’s tourism in play.