Hotel Investment Overview – Q1 2022
Investment volume in hotels assets closed Q1 2022 on an impressive high note reaching a total of c. €1.0Bn, a record figure in the historical series. Forecast for FY22 is potentially even brighter than FY21, where pre-pandemic levels were already surpassed and €3.18 Billion were invested (+200% vs. FY20). On a regular year, investment volume in hotels is found within €2.0Bn – €3.0Bn, showing that investors’ appetite has been restored for an asset class proven to be the economic backbone of the country, with tourism representing c.12% of total Spanish GDP.
Investors began raising funds last year with the aim of pouring into the Spanish hotel market (hardly punished by the pandemic). The general investor profile included leisure assets at reduced prices, but against all odds, prices didn´t fall as initially expected. The anticipated sale discounts deriving from the pandemic and the hoteliers´ operational difficulties hardly materialised and as a result of high selling prices and high liquidity, yields fell by 75 bp to 3.5% – 5.0% range in urban locations.
Of the €3.18 billion investment in FY21, half went to the urban segment and the other half to the vacation segment. Although all types of assets have been transacted (from core to value-add), the luxury segment remains the most sought-after, with the sale of Hotel Bless (Madrid) leading the way with a transaction price of €115 million and investors paying over €1 million per room.
On the sell-side, hotel chains have been responsible for approximately 60% (€1.87 billion) of total divestments. After a year and a half of cash drainage due to the slump in demand and slow recovery of the sector, these companies decide to sell some assets to generate liquidity.
Of the total 145 transactions recorded in FY21, Barcelona and Madrid were the leading fund recipients with €753 million and €468 million respectively (38% of the total). The Canary Islands and the Balearic Islands accumulated €633 million and €541 million of investment volume respectively (37% of the total). Besides these traditional locations, Malaga, Cadiz, Seville and Alicante present attractive profitability’s reaching c.6.5%. From CG Capital Europe, we expect a significant rebound in international tourism for FY22, although domestic demand will continue to be the driving force behind the Hotel sector upswing. The pandemic has undoubtedly opened a window of opportunities for investors to acquire assets and the Q1 2022, along with the FY21 figures, impulse us to remain optimistic for the remainder of the year where a prolific pipeline volume peak through