In the first quarter of the year, the Canary Islands accumulated 14% of hotel investment in Spain by registering three transactions, according to data from the consultancy firm CBRE, which indicates that the Spanish hotel sector has registered an investment volume of 400 million euros in the first quarter of 2023, 59% less than in the same period of the previous year, which was a record year.
Hotels accounted for 14% of the total real estate investment volume through 12 transactions and 1,826 rooms, compared to 39 hotels and 5,475 rooms in the first quarter of 2022. In addition, high-end hotels continued to lead investment, with 5-star hotels accounting for more than 70% of the total transacted (three hotels), followed by 3-star hotels (15%) and 4-star hotels (14%). According to CBRE, this quarter 100% of the volume was allocated to individual asset investment.
Institutional funds were the main players, accounting for 80% of the total volume transacted. In terms of origin, French investors dominated the market with 61% of the total volume. By transactions, the sale of the Dolce Sitges hotel and the Sofia Barcelona hotel accounted for more than 60% of the total hotel investment in the quarter.
In terms of asset type, investment interest was higher in the urban segment hotels, which accounted for 54% of the total through four assets, compared to 46% of the investment which was concentrated in the holiday segment through 8 assets.
By destination, Catalonia accounted for 63% of the total volume (EUR 252 million through three transactions), being the favourite destination for investors this period, followed by the Canary Islands and the Balearic Islands, with 14% of the investment each, through three and two hotel transactions, respectively.
Prime rental yields remained stable during the first quarter at 4.75% in Madrid and Barcelona and 5.75% in the Canary Islands. On the project pipeline side, around 300 hotels (approximately 32,000 rooms) are expected to be opened in Spain by 2024, 25% of which will be high-end (5-star and 5-star GL), with around 50% concentrated in Madrid, Malaga, Valencia and the islands.
“Tourism in Spain is returning to 2019 levels and the operating results of the hotel industry during the first quarter showed higher levels than those recorded a year ago and pre-pandemic figures,” highlighted the director of CBRE Hotels Iberia, Jorge Ruiz.
ROOM RATES RISE BY 12%
The average price per occupied room (ADR) stood at 98.19 euros, 12% higher than in the 2022 quarter, and the average revenue per available room (RevPAR) reached 58.24 euros (+35%). The markets that showed the best performance during the quarter in this regard were the Canary Islands, Barcelona and Madrid.
Internationally, the CBRE Global Hotel Outlook 2023 report shows a good performance of the sector’s operating results at the beginning of the year. RevPAR has recovered in most regions and the trend is for growth in 2023, driven by pent-up demand, the return of travellers from Asia and the normalisation of corporate travel.
In Europe, RevPAR growth has been largely driven by strong growth in average price per occupied room, especially in the luxury segment. CBRE expects rising debt and the economic slowdown to limit hotel investment activity in Europe and reduce yields in the first half, before a recovery begins to take hold in the second half.