Marriott has committed a reported EUR130m to ensure its Ritz-Carlton luxury hotel brand expands into Spain’s recovering hotel market. The deal will see the group not only secure a property to reflag, but settle a trademark issue that has prevented the group from using their brand in Spain to date.
The global hotelier looks set to win the bidding for the Hotel Ritz in the city, which for the last decade has been jointly owned by Omega Capital and Orient-Express; local media report that Marriott CEO Arne Sorenson has visited the city to take a personal interest in the acquisition. The property has been managed by Orient-Express – recently rebranded Belmond – since the pair paid EUR125m for the former Le Meridien property in 2003. According to local media reports, agents JLL have been marketing the building with the choice of retaining or losing the Belmond management and branding.
Currently, the existence of the Ritz prevents Marriott’s Ritz-Carlton from operating a competing branded hotel in the country, so the acquisition will also open the Spanish market up; its Barcelona property runs under the name of Hotel Arts. Currently the group operates 84 hotels in 26 countries, and lists the Ritz in Madrid as a partner hotel. The chain is growing strongly, and will open 15 more hotels by 2016, taking the portfolio to 100 properties. While many of the openings are in Asia, Europe has not been forgotten, with a recent opening in Vienna.
The investment has not been a successful one for Orient-Express. Spanish newspaper Expansion reports that the hotel did not achieve its target profitability, and lost EUR3.3m in 2012. The hotel is in need of investment and upgrading, with a reckoned EUR40-50m needed to compete with other luxury hotels in the city. Reports suggest the current count of 137 rooms and 30 suites could be reduced as facilities are upgraded.
Spanish city markets have been slow to recover from the recession, but recent results from both NH Hoteles and Melia suggest Madrid has turned a corner. According to Hotstats, hotels in the city saw occupancy improve 10.5% in March, pushing revpar ahead 20.7% on the same month in 2013.
And Madrid has seen increasing interest from luxury brands. This summer sees the opening of URSO, a 78 room hotel promised to be the city’s first five star boutique hotel. Further ahead, Four Seasons has committed to open a major new 215 room hotel in the Canalejas project that will also include branded luxury residences, and is due to open in 2017.
In addition, Chinese investor Wang Hianlin recently paid USD358m for the Edificio Espana, a major office block in the city. His Dalian Wanda group will convert the listed 25 storey office tower, which started life as a hotel, back to its original use, alongside around 300 luxury apartments and a shopping mall.
Luxury brands are also gearing up in Barcelona. Investor Emin Capital has purchased two city office towers in the last six months, one for conversion to a Four Seasons, and the other to create a five star Grand Hyatt.
HA Perspective [by Andrew Sangster]: It is now clear that when the global majors have talked about using their balance sheets they meant it. And the Ritz in Madrid is an almost perfect example of when the “strategic” use of a balance sheet makes sense.
Not only is Marriott acquiring an iconic irreplaceable asset but it is securing the brand identity of Ritz-Carlton in Spain. How much of a premium Marriott has paid over and above what a property like the Ritz Madrid would normally command is speculation but ending the confusion over the Ritz name in Spain has meaningful value. The prominence Marriott has to give to pointing out that this property does not offer guests points in its own loyalty scheme makes this clear.
The owners of the Ritzes in London and Paris will be watching the closing of the Spanish deal with interest.