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. Thanks to the wealth of cultural heritage on offer, Madrid has been successful at promoting itself as a short-break destination over the last few years. Although Madrid is traditionally recognised for its strong corporate base, with a somewhat weaker proportion of leisure, the increasing number of luxury properties entering this market is testimony of its increasingly diversified demand base.

Spain’s economy had been expanding in the years prior to the COVID-19 pandemic, before being substantially impacted by it, given the strong reliance of the country’s economy on the tourism sector. According to the International Monetary Fund, Spain registered a GDP growth of 5.0% in 2021. GDP remained stable in 2022, growing around 4.0%, and is expected to slow down in 2023 (+1.0%) before picking up again in 2024 (+3.0%).

Occupancy in Madrid increased by 10.0% from 2015 to 2019, or a compound annual growth rate of around 2.4%. Over this period, improvements in occupancy alongside increases in average rate of 27.0%, resulted in a solid improvement in RevPAR of 40.0%. Post-pandemic, 2021 figures showed the first signs of recovery for this market, and 2022 recorded a RevPAR practically on par with that of 2019, mainly thanks to an increase in average rates. Leisure demand and the increased supply of luxury hotels are expected to have contributed to this rebasing of average rates in Madrid.

Hotel supply has broadly kept pace with the changes in demand over the last few years, although growth in overnights still surpassed the increase in rooms (hence the higher occupancy levels). Madrid’s pipeline is composed of mainly midscale and economy hotels for the next few years, following the recent opening of such luxury hotels as the Four Seasons and the Mandarin Oriental, as well as the rebranding of the Villa Magna to Rosewood. In 2023, among the properties expected to open, two are to be near the airport: the 154-room ibis Budget and the 156-room Holiday Inn Express. Two more ibis hotels are in the pipeline for 2024: the 147-room ibis Madrid Norte Las Tablas and the 101-room ibis Budget Madrid Albasanz. In the luxury sphere, Nobu is also expecting to open its fourth Spanish hotel in 2025 (it has flags in Barcelona, Ibiza and Marbella).

From a transactions perspective, Madrid has historically been a relatively liquid market, with several hotel transactions between 2017 and 2019. However, hotel transactions volume decreased substantially throughout the pandemic, with no individual asset transactions in 2020. Liquidity returned to the market in 2021, with individual transactions including 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). In 2022, the volume of transactions in Madrid increased again. Individual transactions included the Hard Rock Hotel for approximately €65 million (€404,000 per room), the Florida Norte Hotel for a reported €120 million (€300,000 per room) and the Iberostar Las Letras Gran Via for €70 million (around €642,000 per room). We also note that the Bless Hotel, previously sold in July 2021, transacted again in November 2022 as part of a two-property portfolio.

Hotel values in Madrid increased by 5.0% in 2022, driven by the strong performance of this increasingly sophisticated and diversified market, as recorded in our 2023 European Hotel Valuation Index. This still places values per key at broadly 5.0% below 2019 levels; however, prospects for this market remain especially strong, as ADR levels are expected to benefit from further growth as luxury hotels continue ramping up their performances.

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
Managing Director
[email protected]
  • +44 0 2078787722 (w)
  • +44 0 7725781037 (m)