Investment in hotels paralyzed by full ‘boom’ of tourism

However, investments in the hotel market are not very positive. According to the latest report by consulting firm CBRE, hotel sales in the first quarter of 2023 400 million €, 59% less than the same period in 2022 and 22% less than the first quarter average of the last five years.

Between January and March, A total of 12 hotels and 1,826 rooms were sold, compared to 39 complexes and 5,475 rooms that did so in the first quarter of last year. “Institutional funds were the main players, accounting for 80% of the total volume traded. French investors dominated the market, accounting for 61% of the total volume,” the CBRE research says.

What are the reasons for the decline in investments?

The effect of the increase in interest rates, which the European Central Bank (ECB) started to apply in March 2022, on the real estate sector, it happened right away. The increase in rates is associated with financing costs and government bonds, which become the minimum returns required by investors.

This means If a 10-year Spanish bond yields 3.5%, an investor will not buy a property that allows it to earn a 3% annual return in advance.. These funds will not finance the purchase of a real estate with a lower return, with a 5% loan, because the income will not be used to pay the interest on the debt.

In terms of hotels, their return over 2022 was 4.25% in Madrid and Barcelona and 5.25% in the coastal areas. Since the change in monetary policy, yields have increased by 50 basis points to 4.75% in the country’s two largest cities and 5.75% in coastal areas. This half-point increase in buyer-requested returns assumes a 10% decrease in asset value.

Owners’ first reaction before their property drops in value is not to sell the asset for a lower price. On the other hand, this disagreement between investors seeking a demand cut and potential investors and asset holders is waiting for macroeconomic uncertainty to net real prices, causing investment to stall. Antonio de la Fuente, managing director of the Corporate Finance department at consulting firm Colliers, said: estimated this difference in price expectations as 20% During the last Madrid Real Estate Show (SIMA).

What were the biggest hotel operations of 2023?

In the first three months of the year, two transactions accounted for 60% of all quarterly hotel investments: the sale and acquisition of Hotel Dolce Sitges and Hotel Sofia Barcelona. The biggest operation was the purchase by the real estate division of the insurance company. Axa, together with Blasson Property Investments fund, from Sofia Barcelona to Canadian coach Brookfield 180 million euros.

The second French fund took part Perial Asset Management acquired Dolce Sitges from American Angelo Gordon with €63 million. Perial AM purchased this 263-room complex, which will be managed by Grupo Hotusa, with a 6% return after the new property terminated its existing contract with Wyndham.

Tourist boom will continue through 2023

Estimates by Braintrust consulting firm show that: Spain may receive 85 million during 2023 foreign touristsThe expenditures of passengers coming from outside our borders will also increase by 12% compared to 2019 and exceed 100,000 million Euros.

This increase in the number of tourists is also reflected in hotel room prices.The CBRE report “offers higher levels than pre-pandemic levels recorded a year ago.” ADR (average price per room used) was 12% higher than Q1 2022, while RevPAR (average revenue per available room) increased 35% last year. Madrid, Barcelona and the Canary Islands lead the rise in accommodation prices.