Hotel Investment in Spain: Current Outlook and Future Prospects

The COVID-19 pandemic has undoubtedly affected the hotel industry and given rise to a series of challenges that everyone involved in the sector must face. Against this backdrop, the Esade Alumni Real Estate Club and the Esade Alumni Tourism and Leisure Club organised an online session entitled “Hotel Investment in Spain: Current Outlook and Future Prospects” to share impressions on the current Spanish hotel market and the opportunities available in the short term.

Javier Illán Plaza, President and CEO of Millenium Hotels Real Estate, began his presentation by noting that the uncertainty that the hotel industry is currently experiencing on a daily basis prevents us from drawing conclusions about how the sector is faring after this most atypical summer. “This is an uncertain year,” he commented, “and we do not have a clear idea of how long this situation will last.” However, the sector has been affected less by restrictions on opening and more by limitations on mobility, since one of the conditions that tourists want when they travel is safety. The drive to learn about other cultures and explore new places is clearly a part of human nature. Therefore, negative factors seem to have accumulated in the present, while positive factors remain on the horizon in the future. In Javier’s view, Spain needs to be a safe destination. When life finally returns to normal, he trusts that the sector will once again pick up steam.

Seeking opportunities in the hotel industry

Pablo Granell Peris, Head of Spain for Real Estate at Pictet Alternative Advisors, provided a look at the investors’ point of view. According to Pablo, investors should shift their focus towards assets that can show more resilience in the long term. They should seek out opportunities within the hotel industry, primarily through value investing, but always exercising great caution, although it is true that the real estate sector is cyclical.
Although the sector currently has a number of indebted assets, the experts praised the response of the traditional banking sector, which has been exploring collaboration options. According to Pablo Gómez-Almansa, Managing Director of Arcano, “banks should give hotels a few months of breathing room to repay their loans”. As far as public aid is concerned, he argued that one-off solutions fall short of providing a real response. According to Víctor Martí Gilabert, CEO of Atom Hoteles SOCIMI, the aid provided in the form of government-backed loans and furloughs was appropriate, but now insufficient. The opportunity in this market, therefore, requires collaboration between the administration and the private sector.

“The drive to learn about other cultures and explore new places is a part of human nature”

As the experts noted, real estate investors do not invest in the short term, but in the medium to long term. We are currently experiencing a moment of imbalance and uncertainty, but reality will surely change, so it is essential to stay in business. According to Gilabert, now is a good time to refurbish properties to get them ready for the return of normal life: “We need to get to work and adjust to our current situation. What we are experiencing is not a liquidity problem or a financial crisis. We’re going to get our money back.” The CEO of Atom then noted that “behind every hotel there are workers who have to go back to work. As companies, it is our obligation to manage this.”
The speakers all agreed that demand will recover once the health crisis passes. However, more work needs to be done to prepare for that moment. Finally, Pablo Granell Peris struck a hopeful note by quoting Winston Churchill: “Never let a good crisis go to waste.” Indeed, every downturn eventually leads to new opportunities.

Click here to watch the video of the session