Europe -  Madrid, Spain

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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 starting to change, 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 Economist Intelligence Unit (EIU), 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, the GDP is expected to recover strongly over 2021 and 2022 at 6.0% and 5.0%, respectively.

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.

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: following its acquisition in May 2015, the 167-room Ritz Hotel closed on 28 February 2018 for a complete renovation and rebranding to Mandarin Oriental, officially reopening on 15 April 2021. Another recent opening included the 222-room Four Seasons Madrid on 25 September 2020. Furthermore, other luxury brands are currently part of Madrid’s hotel pipeline, such as the 200-room Madrid Edition in Plaza de las Descalzas, expected to open in 2021, and the rebranding of the well-known Villa Magna to Rosewood, also in 2021. Moreover, a 139-room JW Marriott is also currently under construction in Plaza de Canalejas, expected to open in 2022. 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. Around four individual assets transacted in 2018 and several more followed in 2019. Major transactions in 2019 included the aforementioned proposed 139-room JW Marriott Hotel (formerly the proposed W 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, €27.5 million and €21.3 million, respectively. Although hotel transactions volume has decreased substantially since the start of the pandemic, with no individual asset transactions in 2020, the proposed Edition Hotel changed hands in February 2021 for a reported €205 million (around €1 million per room). 

Change In Value For Market: (€Euro)

Legend
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: Less than -10%

For more information, please contact:

Sophie Perret, MRICS, MBA
[email protected]
  • +44 20 7878 7722 (w)
Nikola Miljković
[email protected]
  • +44 20 7878-7721 (w)
  • +44 7 593572865 (m)