Refurbishment and Repositioning, top of priorities for the hotel sector in 2018

Deloitte

Refurbishment and Repositioning, top of priorities for the hotel sector in 2018

A report prepared by Deloitte highlights the strong investment pull that has been experienced since 2017 in Spain, with 74 new hotels expected to open in 2018

The good results obtained by the tourism sector in the last year are being accompanied by a strong investment in hotels, according to the study The Hotel Property Handbook 3.0 by Deloitte, in which it is detected that there is a strong interest on the part of investors in financing hotels due to the bonanza that the sector is going through in the country. In the first five months of the year, more than 2,400 million euros have been invested, in addition to operations under negotiation, which will be closed in the coming months, with a value of around 4,200 million euros. These figures mean that Spain is accumulating 22% of the total investment in hotels that is taking place in Europe, despite the fact that some signs of a slowdown in the sector are already being detected.

Thus, the report detects a strong interest on the part of Spanish investors to finance hotel properties as well as an increase in the demand for financing for refurbishment, repositioning and construction of new facilities. The number of new hotel complexes opened and renovated in 2018 was consolidated (74 new hotels and 12,535 rooms); renovations also continued to grow from 2015-2016 (124 hotels and 17293 renovated rooms). This trend is expected to continue in the future and forecasts predict that a total of 30,600 rooms will be renovated between 2018 and 2020.

As Javier García-Mateo, a partner of Deloitte Financial Advisory, points out, in 2018 “the volume of investment was almost as high as last year’s total” thanks to “the venture capital funds”. The positive figures are mainly due to the tourist boom of 2017, which has led to the reactivation of the real estate market as well as the economic improvement.

For all these reasons, the large hotel groups have taken advantage of the years of growth to invest in improving their asset portfolios. In fact, in 2017, the opening and refurbishment of hotels was consolidated with projects in 120 hotels and almost 17,300 rooms. In addition, according to the report, 173 new hotel properties are expected to open in Spain, adding up to 30,000 rooms by 2021. As Patricia Plana of Deloitte Financial Advisory points out, “53% of these openings will be new projects and 47% rehabilitations”.

However, not all of them are good news for the sector, as the study states that 65% of the hotel offer in Spain is obsolete. Hotel renovation and refurbishment is therefore a “priority” and, by region, the areas requiring the greatest effort are the Canary Islands, Andalusia and the Balearic Islands. In the case of Galicia, the average age of hotels is 9 years, with a national average of 9.3 years.

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