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25 January 2021 | Hoteles

Hotel investment in Spain recedes by 62% in 2020 due to Covid-19, according to Christie & Co's latest report

International hotel property adviser, Christie & Co, has published its annual hotel investment overview for 2020, a year marked by the unprecedented COVID-19 crisis, which has severely impacted the tourism sector.

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The report notes that during 2020, investment activity receded to levels that the market has not experienced since 2013. The total investment volume in the hotel sector reached around €900 million, just 40% of the €2.4 billion reached in 2019, and an amount comparable to that of 2013. Whilst the total number of transacted rooms was close to 8,300, spread over about 70 assets, including both existing and future rooms in conversion and development projects. Comparatively, in 2019, nearly 16,500 rooms and the more than 114 assets were transacted across the market.

The level of hotel investment in urban destinations reached €300 million, 33% of the total investment volume across the market, a significant decline against 2019 (59%). Contrastingly, the resort segment generated a higher level of buyer interest, capturing two-thirds of the total investment volumes.

Christie & Co also observed significant changes to investment profiles in 2020, with investment firms (private equity and core funds, with two-thirds of the investment), private investors and family offices emerging as the most active buyers. Hotel groups, due to their need to safeguard treasury, and REITS that had been very active in recent years, remained in the background. On the other hand, the relative weight of private investors and family offices grew in 2020.
 
The geographical origin of the investment was also greatly affected, with a 57% decrease in domestic investment, which in 2020 accounted for no more than 27% of total investment. Swiss capital (22%) and German capital (13%) led the portfolio transactions. A notable deal which took place was the sale of the Hotel Formentor by a fund based in Andorra (20%).
 
Average price per room declined by 12%, reaching €125,0000. This decrease can be attributed to the discounts applied by investors during 2020, along with particularly intense activity in secondary markets (where the price per room has historically, always been lower).

Inmaculada Ranera, Managing Director at Christie & Co in Spain and Portugal comments, “2020 will be remembered as an "annus horribilis" – a terrible year for the whole world. However, we are convinced that 2021 will offer us all the beginning of the long-awaited recovery. We need to travel again and act as tourists, whether business or leisure, to get our lives back to a certain normal.”

Coré Martín, Head of Investments, adds: “We expect a strong recovery in investment levels in 2021, mainly, of value add funds. We expect to see the purchase of medium-sized portfolios increase, along with the entry of financial partners into several hotel companies and the start of a process of consolidation of the sector.”

Íñigo Cumella, Associate Director and author of the report concludes: “The need for hotel operators to allocate resources generated in recent years to cover ongoing costs whilst they are closed, has prevented them from investing in the acquisition of new assets. In addition, the lack of visibility with respect to recovery has significantly limited their capacity to make new lease commitments, which in turn has impacted the investment activity of REITS and family offices.”

Complete report available in our Publications Page