Investment in the Spanish hotel market reaches €3.18 billion in 2021

• 3.2 billion euros were invested in the hotel market in Spain in 2021, registering the third-best historical record.
•  Investment activity has been rejuvenated over the course of the year, with the second half of the year accounting for 65% of total investment.
• The pipeline of deals in progress, with volumes approaching €1.5 billion, indicates that the trend is expected to continue during the first part of 2022.
• Hotel operators, with an urgent need for capital have been the main players on the sell-side.
  
  
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Hotel investment in Spain reached 3.2 billion euros in 2021 (including hotels in service, properties to be converted into hotels and land for hotel use), as per data provided by the Hotel Investment Report produced by Colliers.

Last year, a total of 127 hotels and 22,249 rooms were transacted in Spain, versus 68 hotels and 7,228 rooms in 2020. Furthermore, another 18 transactions took place for hotel development land and properties to be converted into hotels.

Only in two previous years (2017 and 2018), there have been hotel investment figures in Spain exceeding 3 billion euros, which highlights how extraordinary this figure is (26% higher than 2019).

Equal distribution between urban and holiday segments

In 2021 investment was evenly distributed between the holiday and urban segments (50% - 50%), unlike in previous years, when the holiday segment was the main player. Despite investor interest being more focused on holiday assets, high-profile transactions in both Madrid and Barcelona have helped to balance the demand.

Barcelona and Madrid compete in the urban segment, while the Canary Islands and the Balearic Islands are the holiday destinations for investors.

Barcelona and Madrid were once again the leading urban destinations with 754 and 468 million euros respectively, accounting for almost 38% of the total (1.2 billion euros) for the second consecutive year. Significant transactions, such as the sale of the Hotel Sofía and Expo - as part of the sale of Grupo Selenta to Brookfiled , the NH Collection Gran Calderón acquired by Lasalle Investment, and the Grand Hotel Central and the former Tryp Apolo, both acquired by Schroders, are just a few of the 21 transactions registered this year, which have led Barcelona to reach its highest annual record ever.

Meanwhile Madrid, with 10 transactions, recorded the largest single asset transaction. Hotel Edition was acquired by Archer for over 200 million euros, which equates to the highest price paid per room. Hotel Bless was acquired by RLH for over 1 million euros per room.

In the holiday segment the Canary Islands and the Balearic Islands were the main destinations, totalling 633 million euros and 541 million euros respectively, representing 37% of total investment. Activity included both outstanding single asset transactions, such as the sale of the H10 Punta Negra to Blasson Property for its conversion to the ultra-luxury segment and portfolio transactions by RIU and Grupotel.

Beyond the top four destinations, Málaga is worth highlighting as after a year of inactivity, it witnessed 13 deals for a value of 267 million euros in 2021, including the purchase by the JV between Stoneweg and Bain Capital of H10 Andalucía Plaza and the sale of Hoteles Natali and San Fermín, both acquired by JVs between international funds and operators (Zetland Capital & Fergus and Navis Capital & THB, respectively).

Revival of portfolio operations

2021 saw a revival of portfolio transactions resulting in a total of 12 portfolios transacted, comprising 56 hotels and 9,375 rooms for a total volume of 1.2 billion euros.

These include Brookfield's purchase of Selenta Group for 440 million euros, Riu's acquisition of the minority position held by TUI in its joint venture, Meliá's sale of a majority stake in its Victoria Hotels & Resorts company to Bankinter's private banking investors and Castlelake's entry into the capital of Socimi Millenium Hotels in order to boost its growth. At the end of the year, a new portfolio transaction was closed by Perial, acquiring a package of five B&B hotels from Corum and the purchase of another four in 2022 has been announced.

TOP 5 PORTFOLIO TRANSACTIONS*  

(*) Portfolio transactions are ordered by volume. The total volume for each one is not public.

Strong increase in purchase prices

The average price per room of transacted hotels reached a record high of 157,648 euros per room (+33% vs 2020), mainly as a result of the sale of numerous prime assets, including two hotels that exceeded €1 million / room (Hotel Edition and Hotel Bless, both in Madrid) and several hotels that exceeded € 500,000/ room (Grand Hotel Central in Barcelona, Punta Negra in Majorca and Hotel Único in Madrid). Therefore, despite the wide dispersion of prices among the 127 hotels transacted, the trend of growing average prices observed before the pandemic has been recovered.

"The pandemic has undoubtedly turned out to be a window of opportunity to acquire assets that in another market context would not have been traded, rather than an opportunity to obtain significant discounts. Prime assets have shown their high liquidity and their yields low sensitivity to market uncertainty. Other assets have experienced some valuation adjustments based on their quality, although much lower than expected due to the liquidity in the market and investor appetite after months of paralysed activity". - comments Laura Hernando, Managing Director of Hotels at Colliers.

Hotel chains, the main players from the sell side

After over a year and a half of cash drain due to the sharp decline in demand and the slower pace of recovery in the sector, the hotel operators have been forced to undertake major asset divestments to build up a liquidity cushion. In 2021, around 60% (1.9 billion euros) of divestments were carried out by hotel operators, including the sale by Selenta of its four main hotels, the sale by Meliá of a portfolio of eight hotels, the various sales by TUI and the sale & leaseback operations by Iberostar. 

MORE ACTIVE CHAINS ON THE SELL SIDE

On the buy side, as in recent years, the international origin of the acquiring funds was particularly noteworthy, reaching 1.8 billion euros, representing 58% of the total. Most of these players are Core or Value added investment funds such as Brookfield, Archer Capital, Schroders, Castlelake or Lasalle Investments.

TOP 10 FINANCIAL INVESTORS ON THE BUY SIDE

At the national level, apart from some large transactions carried out by hotel chains such as Riu, Grupotel and Hoteles Globales, the main investors have been the Grifols family, which has acquired the Hesperia Presidente in Barcelona, Anpora Investments - owned by Ricardo Portabello - with the purchase of the Alexandra in Barcelona, and the Socimi All Iron, which has acquired 8 properties to be converted into tourist flats.

Hotel investment market outlook 2022

After record-breaking 2021, the outlook for the new year is very positive considering a pipeline of deals in progress with volumes approaching €1.5 billion. Although the pace of recovery, both economically and in terms of tourism demand, is slower than expected due to doubts about the pandemic having not being dispelled. The vaccination campaign has played a decisive role in the effective reduction of the risk of serious contagion, and many are beginning to see the great Omicron wave as the last and final one before confidence in the recovery is fully restored by the main players in the tourism sector.

Furthermore, the frenetic activity of the past year has resulted in numerous price benchmarks in the market that will contribute to future purchasing decisions, determining the real impact of the pandemic on each asset type.

“Overall, we believe that the trend of the past year will continue and that, with a few exceptions, we will not see many distressed transactions. As already observed, quality assets have weathered the storm best and will continue to do so. The market fundamentals are very positive, including the country's global leadership in tourism, strong investor appetite, excess liquidity with interest rates at historic lows, high purchasing pressure and plenty of repositioning opportunities" - concludes Laura Hernando.