Why state funds are buying hotels in Spain
2023 has not been a strong year for real estate investment. Market reports from national consulting firms show a sharp slowdown in overall volumes, with a drop around 50 percent compared with the same period in 2022. Yet one asset class has remained resilient: hotels. The rise in interest rates has cooled many segments, but hotel assets have continued to attract capital.
From January through September, hotel real estate activity reported a total value of 2.2 billion euros, a figure that is only about 7 percent lower than the prior year, according to CBRE. International investment funds accounted for roughly 75 percent of this activity, with 34 percent coming from the state and 27 percent from corporate groups. By the end of October, provisional data suggested that 2023 could surpass the figures from 2022, signaling a possible peak year for hotel acquisitions. In fact, 2023 may become the third strongest year in the historical series, trailing only the landmark deals of 2018 and 2017 when large-scale purchases by Blackstone and others helped shape the market.
Recent weeks have seen three major hotel investments, two of which involved state-backed buyers. The Abu Dhabi sovereign wealth fund ADIA paid 600 million euros for a portfolio of 17 hotels. In Spain, around 250 million hotel units are owned by the founders of the Tryp chain. The Calviá Beach Project, a seven-hotel complex in Magaluf, is controlled by Avenue Capital. A third notable deal targeted the luxury segment, with the Olayan family from Saudi Arabia purchasing the Mandarin Oriental in Barcelona for a value surpassing 200 million euros. Together, these operations total more than 1 billion euros, underscoring the strong role of Arab capital in shaping the landscape.
More recently, another large investment emerged, led by a different sovereign fund, Singapore’s GIC. This fund, one of the most active players in Spain, acquired 35 percent of Hotel Investment Partners from Blackstone, making HIP Spain the largest hotel owner in the country with about 59 assets located primarily in the Canary Islands and the Balearics. The deal was reported by the North American business publication Finance Times, with an approximate value of 1.4 billion euros. This development pushes the total investment by state-controlled funds in the national hotel sector above two billion euros. Colliers notes that the majority partner of HIP, Blackstone, often collaborates with GIC on such ventures, highlighting a broader pattern of partnership among major international players. Laura Hernando, who leads hotels at Colliers, described this as a natural trend, explaining that Spain has matured as a market with solid infrastructure, reliable legal systems, and highly sought-after locations that appeal to international buyers.
Why are state funds buying hotels in Spain?
Victor Casarrubios, a partner at an international real estate law firm, explains that state funds have long been prominent players in Spain. He notes that 2022 was a record year and this year is proving to be similarly active. Several factors drive this activity: diversification of real estate portfolios into new sectors, technology investments, and a willingness to pursue assets in uncertain financing environments. Those who stay the course and seize opportunities stand to benefit from stability and growth.
Jorge Ruiz, head of CBRE’s hotels division in Spain, confirms that Arab funds are buying hotels to diversify their portfolios and to hedge against shifts in other asset classes. The current climate, sometimes described as a fossil-fuel transition, appears to push these investors toward real estate and hospitality assets with strong returns. In the Olayan case, the group expanded its luxury portfolio by adding the Mandarin Oriental properties in Barcelona and Madrid, mirroring a broader strategy of strengthening flagship properties in key cities.
The investment story around GIC is viewed as rational by industry observers. Víctor Casarrubios argues that GIC’s approach makes sense within its broader real estate plan in Spain, which spans offices, residences, logistics, and luxury hotels. The firm’s diversification into the leisure segment aligns with a wider understanding that high-end hospitality can anchor a balanced, long-term portfolio. Colliers points to HIP’s majority partner, Blackstone, as a frequent ally in these deals, reflecting a pattern of collaboration with the Asian sovereign fund. This is not GIC’s first move in the hospitality space, with prior investments including stakes in European chains.
Overall, state funds are looking for investments in the 100 to 200 million euro range, a frequency confirmed by CBRE’s leadership. These investors tend to target well-located luxury hotel complexes or portfolios with high visibility and sustained demand. The market consensus is that hotels are a resilient sector, attracting capital even when other segments slow down. Industry voices note that four- and five-star properties, whether urban or resort-style, remain the most attractive targets for large-scale capital.
Have hotel prices dropped due to interest rates?
Last year’s rate hikes by the European Central Bank created a misalignment between seller expectations and what buyers are prepared to pay. Yet several experts emphasize that price adjustments in the hotel segment have been limited. The sector continues to witness robust transaction activity, underscoring the sector’s ongoing appeal.
Laura Hernando points out that while there may have been minor price adjustments, they have not driven a wave of sales. The macro environment poses headwinds, but funds generally seek asset growth through value creation, not through outright price declines. Jorge Ruiz adds that the hotel market has exhibited the smallest correction relative to other sectors, with buyers pursuing diversification and leveraging Spain’s solid tourism fundamentals. Casarrubios concurs, noting that hotel prices have remained steady and that the gap between buyer and seller expectations persists.
What will happen in the hotel market in the coming months?
Victor Casarrubios
The near and mid-term outlook for the hotel industry remains positive. Demand continues to rise as travel recovers, and occupancy levels stay high. Hotels are increasingly viewed as stable, attractive assets, suggesting that deal activity will persist into the next period.
Jorge Ruiz
The sector shows continued dynamism with favorable indicators for year-end results. Strong tourism data and solid operating performance support ongoing momentum. While some price adjustments could appear in the second half of the year, the overall outlook remains constructive.
Laura Hernando
Spanish hotels are likely to remain a focal point for international and sovereign funds due to the sector’s solid fundamentals. These fundamentals drive deal flow, volumes, and a large share of investment activity. In terms of players, international funds have completed a substantial portion of deals, but national funds remain highly active as well.