Spanish Hospitality Industry Investments 2019

Some of the people that contact us for legal advice are investors with an interest in the Spanish hospitality sector.

With the beginning of a new year, it’s the perfect time to look into the top 2019 trends in the industry. Below, we describe seven highlights.

  1. Stable growth

Spain is the third most visited country in the world. In addition to the country’s western European location and Mediterranean weather, there are two other important factors that make Spain appealing both to visitors and investors alike: the fact that Spain is seen as a safe destination and a strong economic recovery.

Tourism contributes 13% of the Spanish GDP and provides 11% of the jobs. By the end of 2016, 70 million tourists had visited the country in the year. According to the World Travel and Tourism Council (WTTC), in 2017, these numbers will increase an additional 2,9%. The WTTC also forecasts an average 2,7% annual increase until 2020.

  1. Investments on the rise

Abundant liquidity in the world’s capital markets is driving investments in the hotel market. According to the Spanish Hotel Sector Report of BNP Paribas Real Estate, direct investments in the Spanish hospitality sector grew by 18% through July 2016, reaching €996 million. This compares with €840 million for the same period in the previous year. In 2017, it is anticipated that the threshold of €1 billion will be surpassed.

SOCIMIs (the Spanish real estate investment trust vehicle) are responsible for many important direct acquisitions. In July 2016, investments by SOCIMIs had already reached €82 million thanks, in large part, to a transaction involving the Hispania group of hotels, compared with the €10 million of direct acquisitions in 2015.

  1. International tourism

Spain has significant growth prospects thanks to an influx of travelers from emerging markets such as China, Brazil and Mexico. The number of investors and travelers from China is increasing dramatically. That means that in 2017 and onwards, hospitality and tourism stakeholders in Spain will have to be ready to adapt to the requirements of these new consumers. According to Internet travel consolidator SiteMinder: “Hotels should maintain their traditional strengths such as brand value and customer service. It will also become increasingly important to know your market and your customers and offer them a tailor made product.”

  1. Distressed assets

The Spanish hotel market presents an opportunity for investors when it comes to bringing value to distressed assets. Investors attending the Mediterranean Resort and Hotel Real Estate Forum held in Madrid in December 2016 pointed out that there are US$1 trillion of non-performing hotel loans on European banks balance sheets, with more than 50% of the total in the Mediterranean. These assets would benefit from a hotel capital infusion, and when coupled with comprehensive international savvy hotel management, the assets can regain market viability, focus, and dominance.

  1. Mixed-use resorts

Mixed-use resorts represent a key investment and development opportunity in the Mediterranean, in general, and in Spain, in particular. The mixed-use model is alive and well as a hotel development tool and has now evolved to include not only the traditional retail and restaurant amenity mix, but also residential, offices, meeting rooms and co-working spaces. According to Francisco Gutiérrez of The Innova Room, these type of mixed use developments make a lot of sense because hotels often have unused, yet potentially valuable, square meters located in their ground and basement levels, rooms that are interior and without a view, and so on. By changing the use of these spaces, hotel owners can turn lost space into profit generating centers, presenting to investors the opportunity to obtain a surplus value while hotel clients benefit from a wider service offering.

In Spain, the residential piece within mixed-use resorts is a priority in order to target the second-home and resort condominium buyers market. Some worry about the impact that Brexit could have on tourism and residential sales, but so far, the negative impact has been limited.

  1. Health and Wellness

The fixation of an increasing number of travelers on mindfulness and wellness will see the rise of investments in ‘feel good hotels’ in 2017. These hotels will offer tailored exercise classes, detox and yoga programs, massages, and so on. The idea is for hotels to offer programs that guests can undertake in between time spent lounging on the beach and kicking back during cocktail hour, as well as a means to attract visitors in off-season periods.

  1. Local sourcing

The locally sourced or kilometer 0 trend will have an impact on hotel operations in 2017. Increasingly, it will be seen as a requirement that hotels include locally sourced foods in their restaurant menus. ‘Edible resorts’ with micro-gardens, olive groves and vineyards are also on the rise.

If you are considering an investment in any fashion or manner in the Spanish hospitality sector and want legal advice on how to do so, please don’t hesitate to contact us.

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