• Spain retains the heat

Spain’s hotel operators reported a strong year of trading in both domestic and international markets, with plans to expand in the coming year.

The results came as the country continued to attract investors, with the resort market in particular still offering value.

At NH Hotels Group, the company said that it would continue to focus on improving estate and pushing growth through its upscale brands. Ramón Aragonés, CEO, said: “We will boost the profitability of the group’s premium brands; we will foster a dynamic commercial and pricing strategy; we will continue to execute our asset rotation policy and to analyse opportunities to reposition the hotels with the highest potential; we will focus on managing the company’s operations efficiently; and we will remain committed to generating cash and reducing debt.”

The company has benefitted from Spain’s recovery, reporting revenue growth of 13.1% for the first nine months of the year, with the recovery in Benelux also driving business.

The group has raised Ebitda guidance for the year from EUR225m to EUR230m. For the nine month period NH reported Ebitda up 37% to EUR170m, implying a revenue-to-Ebitda conversion ratio of 63%.

At Meliá Hotels International, the company reported an 11% increase in full-year Ebitda to EUR310.3m, ahead of expectations, on strong results from the Caribbean, Spain and Asia, and the recovery of markets such as Paris and London, which helped shield the group from unexpected negative events such as Hurricanes Irma and María in the Caribbean, the loss of business in Catalonia during the fourth quarter, due to political instability, or the dollar-euro exchange rate.

Meliá was continuing to invest in its domestic market, with a combined investment in Spain (alone and with joint venture partners) of more than EUR100m this year.

The company said that it was set to expand further into Asia, which represented 33% of the group’s pipeline. Gabriel Escarrer, CEO & EVP said: “The Asian market is undoubtedly the one with the greatest potential for international travel, but it is also a very complex market for Western companies, which is why the learning curve Meliá has worked through in Asia over the last 32 years and our strong alliances with important financial and real estate groups in the region such as Greenland China, TCC-Land in Thailand or Aurelian Land SDN BHD in Malaysia, give us a fundamental competitive advantage to help us grow in this part of the world.”

Spain’s hotel investment market overtook Germany as the second-most liquid in EMEA last year, according to JLL. Investment reached EUR3.6bn, up 65% on the year, with the group expecting resorts to further feed the market this year.

In 2017, the number of international tourists visiting Spain improved for a fifth straight year. The country attracted 82 million tourists, making Spain the world’s second-most visited country after France and pushing the US into third place. Tourist spending has also hit a new record in 2017, rising 12.4% in the year from 2016. Revpar for the year rose by 8.8% EUR85.29, according to STR Global.

Patrick Saade, co-head of European transactions for JLL’s hotel and hospitality group said that domestic and international investors were being drawn to Spain’s “improving economy together with impressive hotel operating performance and a booming tourism industry,” says, adding that Spanish resorts should be an area of focus for investors, with many in need of refurbishment.

International investment accounted for half of Spain’s hotel transaction volumes in 2017, with half of those investors coming from within Europe. North American buyers followed closely, making up another 40%. The Canary Islands remained the favourite destination, at EUR939m or 27% of total volume.

International investors such as Foncière des Régions Area and Batipar have been playing an increasingly prominent role in the Spanish hotel investment market. Gilda Perez-Alvardo, head of the global hotel desk for JLL’s hotel and hospitality group, said: “These investors tend to hold their investments for an extended period, providing stability and depth to the market.”

HA Perspective [by Katherine Doggrell]: Despite the complaints of the tour operators, there remains plenty of appetite for Spain, increasing ADR or not, from both visitors and investors. Now that there is less distress to be picked up from the banks, attention is on the resort market and the year ahead is expected to see further cash piling into it.

While Spain gets its luxury makeover, eyes are on the M&A antics of its operators, with NH expected to sell as shareholder HNA looks for a buyer for its 30% stake, something we at Hotel Analyst understand is likely to happen sooner rather than later. Despite Barceló’s vehement protestations, a Spanish supergroup may yet be in the offing.

December saw Elegant Hotels confirm that it had terminated possible takeover talks with Meliá Hotels International, with the Spanish company prevented from making another move for six months. While the clock runs down on that, there are plenty of other brands out there for the outward-looking group to choose from.

Share →