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Positive long-term outlook for Barcelona hotel investment, argues HVS

Positive long-term outlook for Barcelona hotel investment, argues HVS

The hotel sector in Barcelona will continue to attract global investors looking for long- to medium-term growth, despite restrictions imposed on new developments in the city and uncertainty following Catalonia’s recent quest for independence.

According to a new report on the city’s hotel sector by global hotel consultancy HVS London, Barcelona’s popularity as a short break leisure destination and as a MICE (meetings, incentive, conference and exhibition) venue grew significantly following the Barcelona Olympic Games in 1992.

Coupled with a substantial increase in day tourists arriving via cruise ships, this improved demand prompted the number of hotel rooms in the city to grow steadily, particularly in the four-star sector.

A moratorium on development implemented in July 2015 designed to improve the quality of the city’s tourism offer, curbed the development of at least 38 hotel projects.

The policy was extended for a further year in 2016, and last year it was replaced by the Special Tourism Accommodation Plan, regulating the introduction of further accommodation for tourists.

While this has benefitted the performance of existing properties, the future for new hotels in Barcelona remains uncertain, with only six opening, or due to open, over the next two years, bringing just 1,000 new rooms to the market.

“With supply growth in Barcelona now severely limited and demand continuing to grow the city’s hotels have inevitably seen an increase in occupancy levels and a rise in average rate,” commented report co-author Magalí Castells, associate, HVS London.

“Room revenue per available room rose 3.7 per cent in 2015 and a further 10.7 per cent in 2016, reaching €111.

“Hotel room values have also risen – with 2017 surpassing the peaks of 2016 at €316,000 per room.”

But hotels in the city saw a clear performance decline following the Catalan independence referendum on October 1st, 2017, with double-figure RevPAR growth up to September, followed by a considerable decline in the months after, although the year still ended in positive territory.

“The city’s political situation has impacted the property investment sector, which could cause deals to slow down or even stop if it continues,” commented report co-author Sophie Perret, director, HVS London.

“However, while the moratorium and the PEUAT policy could potentially dent some investors’ appetite for Barcelona, continued demand for hotel rooms means we are strongly optimistic that the city will remain a key source of investment for both global and intra-regional investors.”

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