High-quality hotels in Spain are selling at a record pace, some closing with extraordinary low yields, according to new data from Colliers. In the first six months of 2021, investment levels reached €1.094 billion (US$1.3 billion), the most in 15 years and already topping the €955 million (US$1.1 billion) recorded throughout 2020.
A total of 52 deals (7,333 rooms) were closed on existing hotels, buildings for hotel conversions and land for hotel developments.
The outlook for the second half of the year is similarly aggressive. July kicked off with a pipeline of ongoing transactions totaling approximately €2 billion (US$2.4 billion), about half of which includes deals already closed or at a very advanced stage of negotiations, including:
- The sale of the Gran Hotel Central in Barcelona by Único Hotels to Schroeders, which was announced early July
- The action taken by Riu Hotels & Resorts to acquire the minority stake (49%) held by TUI in their joint venture – including 21 hotels, eight in Spain – which will be formalized soon
- The sale of the Tryp Apolo in Barcelona
- The sale of the hotel portfolio owned by the Selenta Hotel Group
These transactions accompany the market launch of the Ayre Hoteles’ portfolio and a raft of deals involving individual assets that are currently being negotiated.
“A number of factors have coincided in the Spanish hotel investment market which have led to the perfect storm”, said Laura Hernando, managing director of Colliers hotel division. “Investment funds have accumulated historically large cash piles just when they are under massive pressure to invest after a 15-month drought, and there is a pressing need for many hotel chains to divest assets to cover their liquidity slump originated from the pandemic. “This is all happening at a time when there is limited finance available to buyers, which leads us to believe that investment activity will multiply as credit begins to flow again.”
The figures for Spain contrast significantly with those of neighboring countries, such as Germany, the Netherlands and the United Kingdom where investment remains at more moderate levels.
The main reasons for this are two-fold:
- There is ample consensus in the investment community that demand for leisure tourism will recover more quickly than business tourism, and that countries such as Spain – specifically their holiday segment – will rebound very strongly in the short to midterm. It is no wonder then that 60% of investments in the first half of 2021 were in leisure hotels compared to 40% in the urban segment, with many transactions taking place in tourist areas.
- Unlike the asset-light strategy adopted by leading international chains, establishing a clear split between ownership and management, much of the hotel supply in Spain (primarily in the holiday segment) continues to be owned by chains. This explains why domestic operators have ramped-up their decisions to sell in 2021 given the huge pressures on their cash reserves. Meanwhile, the strategy adopted for hotels owned by entities that are not dedicated hoteliers (investment funds, private equity funds, family offices and the like) has been to renegotiate rents or recapitalize, avoiding divestments.
From a buyer’s perspective, core investors have been the most active during the first half of the year, brokering major deals such as Archer Capital’s acquisition of the Edition Madrid; the recent purchase of the NH Collection Calderón in Barcelona by LaSalle Investment; and Bankinter’s acquisition (jointly with a number of the bank’s private banking customers) of a portfolio of eight hotels owned by Meliá Hotels International.
The common characteristics of these deals have been the high quality of the assets traded and, in certain cases, the exceptionally low transaction yields.
“Clearly, quality hotels are still very liquid and can be sold at prices with minimum discounts on their pre-COVID valuations” Hernando underlined. “One could even go so far as to say that the yields in prime markets and on prime products and locations have not been affected by the impact of COVID-19 on the hotel activity.”
