17 Nov, 2017
Madrid: One Of The Best Place To Grow
As the Spanish economy is expected to continue its recovery and Madrid gains further competitiveness as a major business centre, expectations for the hotel market remain favorable.
Madrid is the capital and business centre of Spain. It remains a business destination but it is also a major international leisure destination due to its many cultural attractions, and is one of the most visited destinations in Europe. In addition, it is the third city in terms of world congress tourism, hosting important meetings and international conventions, such as FITUR (International Tourism Fair) or ARCO Madrid (International Contemporary Art Fair).
2016 showed a significant growth in RevPAR (7.2%) driven partly by rising occupancy rates, which are now at around 70.5% (+2.1% from 2015) but mainly by the 5.0% increase in average ADR to €97.7, the highest rate since 2008. Following the decrease in ADRs caused by the financial crisis, ADR levels have been increasing since 2009, especially in the four/five-star hotel segment. Performance has experienced robust growth in the last three years.
Madrid City saw a slight decrease in the number of hotel rooms that opened in 2016. However, the number of five-star hotel rooms grew by 12%.
The luxury hotel trend is experiencing significant growth: 29.6% of hotel real estate investment in Spain was in the five-star hotel category in 2016. New luxury hotel projects are also in the pipeline. Four Seasons has decided to open its first Spanish hotel in the Canalejas Building, one of the most prestigious historical buildings of the city center. Opening has been delayed to Q1 2019. Also in 2019, another new luxury hotel of 600 rooms is set to open after the sale of the emblematic Edificio España in December. This hotel will be operated by RIU and will be the group’s first urban hotel in Spain.
The historical Celenque was bought by KKH Capital Group and Perella Weinberg RE for €90 million to convert it into a luxury hotel. The Spanish record for highest price per room paid in an asset transaction was broken in March with the sale of Villa Magna, one of the most luxurious five-star hotels in Madrid, with a price per room of €1.2 million.
Madrid has been benefitting from the impact of the hotel moratorium in Barcelona and also the political uncertainty caused by the independence movement in Catalonia. Madrid province captured approximately 31% of the total volume of investment in hotels in Spain in 2016.
Significant increase has been experienced in 2016 regarding alternative accommodation: Airbnb offers c.13K accommodation listings in Madrid in January 2017 (compared to only 6.4K in 2015).
In January 2017, Madrid hosted the International Tourism Fair’s (FITUR) 37th edition, with an increase of 6% in number of visitors, a record 245,000. This summer, Madrid will be hosting the «World Pride», an event in celebration of the LGBT community that is thought to attract more than 3 million participants.
New airline routes were opened in 2016 from Madrid to Indian and Chinese cities which will surely permit larger flows of tourism from Asian countries. New airline routes to European cities were also inaugurated.
Madrid is Spain’s second largest industrial center after Barcelona, however it is becoming increasingly dominated by the service sector. Similar to Barcelona, Madrid’s hotel market witnessed a very strong year in 2016 with RevPAR rising by 7.2% to €69 driven by the continued recovery of the Spanish and other Euro area economies and major international events such as the Pride Parade.
As the Spanish economy is expected to continue its recovery and Madrid gains further competitiveness as a major business center, expectations for the hotel market remain favorable.
Our suggestions: 20 Must-Read Books
Some strategies of raising capital: Bringing Your Company Public, Exploring Alternative Capital-Raising Strategies, Refinancing and Minority Equity as Partial Exit Strategies, 5 Alternatives To IPOs, How to Raise Capital For a Company in Financial Troubles, 7 Private Equity Strategies, Why Successful Business Owners Sell Out, The Six Types of Successful Acquisitions, Race to Become a Global Player, Refinancing and Minority Equity as Partial Exit Strategies, Guide To Equity Release Or «Cash-Out»