“These days, hotels are profitable sources of income, which can’t be said for offices,” says Badia.
So, what will this investment surge mean in the coming years? Investors like Badia are betting that Spain’s tourism boom—and its evolution—will translate into large profits for those who invest now.
“Since the 90s, tourism in Spain has been a recurring and stable source of revenue,” Badia says. “What we have seen is that the type of tourism to Spain has changed, and with it, the kind of hotels, especially in urban areas. A few years ago, in Barcelona, there were few international luxury brands, while today everyone is looking to have the best hotel in town.”
Not everyone is so sanguine. Pau Guardans, founder and owner of Único Hotels, says that much of the hotel investment boom can be traced to the poor profitability of other real estate investments in Spain, as well as revised laws for SOCIMIs (Spain’s version of REITs), which have attracted several billion euros into Spanish real estate.
“That there is investor pressure [in hotels] doesn’t mean that hotels are great investments. But they are better than the rest,” says Guardans.
Guardans expects the investment surge to lead to a glut of hotel space in the coming years, which would cut the profitability of investments being made today.
“There will be more supply than demand in hotels in Spain when all these are built in two or three years,” he says. “Barcelona is a clear case. Madrid or the coast too.”
Still, Guardans says he is looking at space in Madrid, which has seen less hotel investment than Barcelona. And investors like Badia expect demand to meet the supply.
“Over the decades, Spain has shown that it is able to absorb the hotel supply. Even in the crisis years, tourists have continued to visit Spain,” Badia says.