Real Estate

Spain supplants UK as top hotel investment destination amid buoyant demand

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Spain has overtaken the UK as hotel investors’ favourite destination this year, following a series of large hospitality deals in the south European country, according to a survey by CBRE.

The UK slid to second place after ranking at the top of investors’ list in 2018 and 2017, when previous surveys had been conducted, according to the real estate brokerage firm. Italy, France and Greece are also among the top five destinations for deploying capital this year, according to the 2024 survey of more than 60 investors including hotel owners, developers and private funds, which will be announced this week.

“Spain is flourishing due to record tourism numbers and robust operational performance from the hotel operators,” said CBRE head of hotels for Europe Kenneth Hatton. “Investors see the opportunity in Spain, both coastal and urban.”

The survey underscores the broadly buoyant mood in the hospitality sector that has driven a return to dealmaking after the pandemic. More than two-thirds of investors surveyed planned to allocate more capital to deals in the hospitality sector because of good trading performances and the expectation that lending conditions will improve if interest rates decrease, according to CBRE.

The findings follow a series of large transactions in Spain last year. Total investments there amounted to €4.1bn, or 30 per cent higher than the previous year and up 70 per cent from 2019.

Singaporean sovereign wealth fund GIC acquired a 35 per cent stake in Spain’s Hotel Investment Partners from Blackstone Group, while Abu Dhabi Investment Authority, one of Abu Dhabi’s sovereign wealth funds, purchased 17 hotels in the country from the Equity Inmuebles fund.

Spain welcomed a record 85.1mn foreign visitors in 2023, 19 per cent more than in 2022 and up 2 per from 2019 before the pandemic.

The survey said hotel investments accounted for the largest proportion of 36 per cent of total commercial real estate investment volumes in Spain, from 18 per cent the year before.

Meanwhile, hotel investment volumes in the UK last year fell 38 per cent to €2.2bn, contracting nearly 70 per cent from pre-pandemic levels. In a city-level survey, London maintained its top place, but Madrid rose to second place after overtaking Paris, which is hosting the Olympic Games in the summer.

Hatton said the subdued hotel investment volumes in the UK were “not a result of lack of interest”, but “minimal product brought to market”.

Interest rate volatility because of inflation made investors nervous in dealmaking, as properties were held back from being put on sale pending more stability. Buyers, fearing the rise in borrowing costs, were also cautious.

“The long-term projections for tourism numbers in Europe suggest that projected supply levels [in the region] will be inadequate to satisfy this demand,” he added.


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