Europe -  Madrid

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Madrid is not only the centre of political life and public administration in Spain, but also a dynamic economic market for real estate, hospitality, commercial banking and higher education. Madrid’s major generators of commercial demand in the local market area are the many corporate head offices and financial institutions in the financial district to the north of the city. The lack of leisure demand is mostly the result of the limited marketing of the city as a destination, given that Madrid has a wealth of cultural heritage to attract short-break visitation. Although Madrid is traditionally recognised for its strong corporate base, with a somewhat weaker proportion of leisure, this is changing, as the increase in the number of luxury hotels in the market attests (as such properties are normally more reliant on leisure demand).

The crisis years in Spain seemed to be a distant memory and the economy had been expanding in the years prior to the COVID-19 pandemic in early 2020. According to the International Monetary Fund, the country registered a GDP decrease of 11.0% in 2020 compared to 2019. Given the strong reliance of the Spanish economy on the tourism sector, the country was substantially impacted by the pandemic. However, GDP recovered strongly in 2021, growing around 6.0%, and is expected to continue recovering in 2022 (+6.0%) and more modestly in 2023 (+3.0%).

Arrivals to Madrid increased by more than 35.0% from 2009 to 2019, or a compound annual growth of around 3.2%. Since 2013, solid improvements in occupancy alongside increases in average rate of over 40.0%, resulted in an outstanding improvement in RevPAR of close to 80.0% – although, these results were from a low base, marking the recovery of the market from the severe economic crisis that hit Spain in 2012. We highlight that in 2020 the performance contracted significantly due to the COVID-19 pandemic and subsequent travel restrictions put in place to reduce the spread of the virus. As a result, hotel values in Madrid decreased by around 15.3% on 2019. The second half of 2021 saw the start of recovery, leading to a 6.4% increase in hotel values in 2021 compared to the previous year. However, overall hotel performance in 2021 continued to be significantly impacted, with RevPAR being around 40.0% of that achieved in 2019.

Hotel supply has broadly kept pace with the changes in demand, although growth in overnights still surpassed the increase in rooms (hence the higher occupancy levels). However, there is positive news for Madrid’s luxury hotel market, including the opening of the 200-room Madrid EDITION in March 2022. Other recent changes to supply in the luxury sphere include the rebranding of the well-known 154-room Villa Magna to Rosewood in October 2021; the opening of the 153-room Mandarin Oriental Madrid (former Ritz) in April 2021, following three years of closure to undergo renovations; and the opening of the 200-room Four Seasons Madrid in September 2020. Furthermore, other luxury brands are currently part of Madrid’s hotel pipeline, such as the 139-room JW Marriott Hotel, currently under construction in Plaza de Canalejas, and the 175-room Thompson Madrid, both expected to open in 2022. Additionally, French chain Evok will land in Madrid in 2023, with the 59-room Brach Gran Via. These luxury developments are likely to help raise the ceiling for average rates in the market in the short to medium term.

From a transactions perspective, Madrid has been a relatively liquid market with several hotel transactions between 2017 and 2019. Major transactions in 2019 included the aforementioned proposed 139-room JW Marriott Hotel for around €82 million (or €600,000 per room) and the 139-room Hotel Aloft Madrid for €57 million (approximately €410,000 per room). Other transactions included the 161-room Hotel Exe Moncloa, the 199-room Hotel Tryp Chamartin and the 149-room NH Las Tablas for €40 million, €28 million and €21 million, respectively. Although hotel transactions volume has decreased substantially since the start of the pandemic, with no individual asset transactions in 2020, liquidity returned to the market in 2021. Individual transactions in 2021 included the proposed EDITION Hotel for a reported €205 million (around €1 million per room); the Bless Hotel for €115 million (also around €1 million per room); and the Hotel Tryp Chamberi for €19 million (€257,000 per room).

Change In Value For Market: (€Euro)

Significant Value Increase: Greater than +10%
Moderate Value Increase: Between +3% and +10%
Stable Values: Between -3% and +3%
Moderate Value Decline: Between -3% and -10%
Significant Value Decline: More than -10%

For more information, please contact:

Sophie Perret, MRICS, MBA
Senior Director
[email protected]
  • +44 20 7878 7722 (w)
  • +44 0 7725781037 (m)