Spain’s Hotel Market Outlook for 2024: Robust Growth and Investment Surge

Spain’s tourism sector achieved remarkable success in 2023, surpassing pre-pandemic records despite challenges like high inflation. Tourism expenditure exceeded 2019 levels, with prices nearly 18% higher. This strong performance is set to continue into 2024, with the industry expected to grow by 2.5%, outpacing the overall economy’s 1.8% growth. In 2023, tourism contributed 12.8% to Spain’s GDP and employed 12.6% of the workforce.

The number of overnight stays in 2023 increased by 1.9% compared to 2019, driven by a 5.5% rise in domestic tourism and a recovery in international visits. The industry welcomed 85.2 million international visitors, surpassing the 83.5 million in 2019. Although overall occupancy rates in 2023 were slightly below 2019 levels, both Average Daily Rate (ADR) and Revenue per Available Room (RevPAR) exceeded previous records, reflecting strong demand and pricing power.

Hotel Investment and Market Dynamics

Hotel investment in Spain reached €4.2 billion in 2023, accounting for 36% of the country’s total real estate investment. This marked a significant increase compared to 2022, with 205 hotel assets changing hands, up from 163 the previous year. High-end hotels dominated the market, comprising 85% of transactions. International investors, particularly from Saudi Arabia, UAE, and Singapore, played a key role, with investment funds making up over 70% of the total volume.

Notable transactions included The Olayan Group’s acquisition of the Mandarin Oriental Barcelona for over €200 million and Singapore’s GIC acquiring a 35% stake in Blackstone’s HI Partners. Madrid and Barcelona emerged as top destinations for hotel investment, with significant interest in both urban and resort locations.

Market Structure and Future Prospects

Spain’s hotel market, historically dominated by family-owned businesses, is undergoing a transformation. The influx of foreign hotel groups and investment funds is driving professionalization and new management models. The market remains dominated by 4-star hotels, but the 5-star segment is growing rapidly, fueled by international brands.

Owner-operated hotels still make up a significant portion of Spain’s hotel supply, presenting opportunities for international hotel companies to introduce branded hotels. Recent years have seen the entry of 11 new hotel groups, including Four Seasons and Rosewood, indicating strong interest in the Spanish market.

Looking ahead, Spain’s hotel sector is expected to reach new heights in 2024, driven by an increase in both domestic and international travelers. The number of travelers is projected to reach 113.8 million, with 352 million overnight stays, representing modest but steady growth. The ADR is expected to increase by 2.3%, with RevPAR rising by 3.4%, reaching €81.7 by the end of 2024. The outlook for 2025 suggests continued growth, with ADR increases averaging 3% annually.