Jorge Ruiz, Head of Hotels, Iberia at CBRE
What have been the drivers of growth in the Iberia region?
The dynamism of the hotel sector in Iberia should be highlighted, predominantly due to record tourism data and the positive evolution of the hotel industry's operating results.
The number of international tourists visiting Spain in 2023 exceeded 85 million for the first time since statistical records have been kept. In Portugal, 2023 posed as a record year in overnight stays and profits in the tourism sector.
In both markets, the hotel sector led investment volumes in 2023. The hotel sector reached a milestone by leading investment in Spain in 2023 at close to €4.1bn, accounting for 36% of the total volumes transacted in Spain. This makes 2023 the second highest year on record for hotel investment volumes in Spain, just behind 2018, when volumes reached almost €5bn.
Moreover, it is the only real estate sector that has seen investment grow (+31%) in Spain when compared to 2022.
A number of large portfolio transactions completed in 2023, with a total of 11 deals accounting for 64% of the total volume and over €2.6bn of investment volume. This includes the acquisition of 35% of HI Partners' portfolio by Singapore's sovereign wealth fund GIC, as well as ADIA's purchase of the Equity Inmuebles portfolio.
When we look to Portugal, the hotel sector was the “star” of the year, accounting for 40% of the total investment at €605m. A six-hotel portfolio deal was the largest of the year, mirroring the want for multi-asset deals we saw on the rise in Spain.
We’ve seen a strong start to 2024 and we expect robust investment volumes for the remainder of the year, especially considering the significant transaction pipeline already under way or about to come to the market.
Where is the capital coming from?
In Spain, investment funds accounted for more than 70% of total volume. This was predominantly made up of sovereign wealth funds, followed by private investors and hotel chains.
In terms of the origin of capital, international buyers dominated the market, accounting for more than 75% of the total with Saudi Arabia, UAE and Singapore investors particularly active.
What types of investor are focused on deploying capital?
In the current high interest rate environment, investors with low or non-financing requirements are more prevalent, including High Net Worth Individuals, Family Offices or Sovereign Funds.
In recent months, we’ve seen Hotel Owner Operators becoming more active. Strong trading performance over the last two years has translated to being very well capitalised.
What product is top-of-the-list?
Investors continue to focus on high-end hotels due to their more resilient and inelastic nature.
As a subsector, resort hotels hold the greatest weight for the Iberia region, but we are starting to see renewed interest from investors in central business districts in Europe’s key, gateway cities.
Can you share some of the similarities and disparities between Spain and Portugal market?
Both offer long-term fundamentals to potential investors. The good climate, wide range of quality gastronomy and the variety of individual destinations (both coastal and urban) make the Iberia region a preferred market for investors and tourists.
Iberia is also in the spotlight for its flurry of luxury openings from many hotel brands, especially international.
Given the strong operational performance, have we seen many brands looking to expand in the region
Forecasts for this year continue to point towards growth, with tourism and operating figures for the region set to perform well. We also expect to see more opportunities come to market as financing becomes more accessible.
International brands will continue to play a key role, particularly in the luxury segment, but we are likely to see growing interest from operators and investors in the budget/low-cost segment.
CBRE has bolstered its Hotels platform in Iberia
By integrating the Spanish and Portuguese Hotels teams under central leadership, CBRE will offer an even more seamless service to its clients across two of the European hotel sector’s key markets, both of whose real estate investment markets were dominated by hotels in 2023.
The centralisation further enhances the integration across CBRE’s pan-European Hotels offering, which combines the best of in-country market knowledge with international and global outreach through the European capital markets platform. The regional platform will strengthen two already well-established businesses and help to spearhead new single-offering, pan-Iberian specialist hotel services in areas such as Investment, Valuations, Strategic Consultancy, Project Management and Property Management.