Three years of calls for independence and hotel moratoriums has affected Barcelona’s occupancy and rate, but hoteliers there are finding new ways to attract guests even as supply remains the critical issue.
LONDON—There is no doubt that the moratorium on new-builds, conversions and renovations imposed in July 2015 and calls for Catalan independence have hurt the Barcelona hotel industry, but sources said investor interest is still very much alive.
Sources added that properties signed before that date are set to enter the market this year or very soon, but with the average hotel development lifespan being three years, very few new hotels will come in the next few years.
Not every part of the Spanish city is affected by the moratorium. The 259-room Nobu Hotel Barcelona will open in September, while the 504-room Hard Rock Hotel Barcelona will begin construction at the end of the year targeting an early 2022 opening.
PortAventura World, a theme park south of Barcelona, opened its sixth hotel in May, the Hotel Colorado Creek, which brings its total resortwide portfolio to more than 2,200 rooms. Arturo Mas-Sardá, chairman of PortAventura World, said a seventh hotel will soon be announced.
“We think that especially the area where PortAventura is located will be growing considerably in the next few years,” he said.
Hoteliers operating in Barcelona understand the root issues that led to the moratorium, but disagree on the solution.
Pau Guardans i Cambó, chair of tourism and hospitality organization Barcelona Global and owner of five-asset hotel group Único Hotels—which includes the Grand Hotel Central Barcelona—recently led an investment seminar of Barcelona hospitality businesses in London.
“We need to manage tourism. All successful cities need to do that, and rules on supply are not such a bad idea,” Guardans said. “There are far many more things on the table to manage.”
Bruno Hallé, founding partner of Barcelona-based Magma Hospitality Consulting, said he, too, thought there was more room for luxury hotels in the city.
“It is difficult to find opportunities. For example, Nobu is a conversion,” he said.
The return of the guest
Hallé said that in the months after the Catalan independence movement enacted an October 2017 referendum—deemed illegal by the Spanish government—upscale and upper-upscale hotels suffered, but have since seen marked improvements. Luxury has also recovered.
“The big thing that we still have is the moratorium,” he said. “I know Four Seasons is still looking, as is Hoxton Hotels. It is difficult, and projects cannot start from scratch but generally require an existing hotel. It is a question of supply and demand.”
Guardans said the story of the city is not entirely based around supply, but added Barcelona needs to deliver reasons for visitors to come to new districts not under current city moratorium rules on development and renovation.
“It is not a question of raising (average daily rate),” he said. “Ten guests at (a luxury hotel) does not necessarily translate as quality tourism, but we have to encourage development in new areas that are not only budget hotels and hostels.”
He mentioned London as the example of a major city that has rebounded and launched new entertainment districts such as Shoreditch and Bermondsey.
L’Hospitalet is one area Barcelona has high hopes for, Guardans said. L’Hospitalet is its own jurisdiction and not officially part of Barcelona.
The idea of adding luxury hotels to new areas is not a far-fetched idea either, he said, who mentioned another inspirational city—Miami—to underline that point.
Magma Hospitality’s Hallé said city planners and hoteliers needed to focus on the wider metropolitan area of the city, Gran Barcelona, to develop new reasons for traveling. He added hoteliers already in Barcelona are happy with the state of things as the value of their hotels keeps growing.
Another concern is that recent May 2019 municipal elections in Barcelona saw the return of the same government that imposed the moratorium.
“It lost support but was able to stay in power by making alliances with other parties,” Hallé said.
“There are no magical solutions, but the fight against illegal apartment and sublets is helping a lot,” Guardans added. “The government has become strict,”
He said there are also huge opportunities in the city for repositioning and adding to existing assets, just not in areas controlled by the moratorium.
“In terms of ADR, we are low,” he said. “A luxury hotel can be had for €250 ($284.93). This is an area we have to look at, especially as the market matures.”
A more global presence might help, Guardans said.
“Less than 60% of our hotels are internationally branded,” he said. “We can bring in new concepts, luxury, boutiques, big brands and beach clubs.”
According to data from STR, the parent company of Hotel News Now, Barcelona luxury hotel occupancy declined 11% to 61% in 2018, which was the largest occupancy decrease among the classes. Year-to-date through May, luxury occupancy is up 6.9% to 60.1%. Economy hotels saw full-year 2018 occupancy dip 2.5% to 85.3%, and through the first five months of 2019, economy occupancy is down 4.5% to 82.3%.
The turbulence over the last few years has affected Barcelona’s average daily rate and revenue per available room. Luxury ADR decreased 5% to €326.59 ($372.23) in 2018, and was mostly flat (-0.1%) year-to-date through May 2019 at €313.90 ($357.76). Hotels in the upper-upscale, upscale, upper midscale and economy classes saw similar year-over-year ADR decreases in 2018, but each have rebounded with ADR growth year to date through May 2019. Barcelona’s midscale segment is the exception, with full-year 2018 ADR up 6.2% to €70.31 ($80.13), and year-to-date through May ADR is up 6.8% to €72.52 ($82.65).
Barcelona’s luxury-class hotels reported a 15.4% RevPAR decrease to €199.25 ($227.09) in 2018, but through the first five months of 2019, RevPAR for the segment is up 6.8% to €188.76 ($215.14). The economy class posted a 7.2% RevPAR decrease to €57.08 ($65.06) in 2018, but year-to-date through May economy hotel RevPAR is up 0.4% to €55.03 ($62.72).
Javier Serrano, STR’s country manager for Spain and Portugal, said the moratorium not only discourages developers from investing in Barcelona, it also sends developers and demand elsewhere.
“(It) had a minimum impact on the market’s performance, and hotels only saw a few booking cancellations,” Serrano said. “The market ended that very same month with absolute performance records with double-digit growth in RevPAR above 15% on a year-on-year basis.”
Serrano said he sees Barcelona once again recovering to being, in his words, “a hot market.”
“Rooms sold has grown 7% year-to-date May 2019, driving occupancy growth to 6% (up to 74.5%) compared to the same period of time last year, when the market was still in decline,” he said. “… However, there has been a pushback following the moratorium and the ongoing demands for independence. Despite the current growth, Barcelona could have achieved even stronger numbers if specifically these two events had not happened. The market could probably have seen occupancy levels at nearly 80%, and ADR levels (across all segments) above €150 ($170.96) on a year-to-date basis.”
Barcelona remains on the map, Hallé said.
“But we will see less investment in hotels, that’s for sure. Capricious owners who are prepared to pay, well, they’ll get in,” he said,
Hallé mentioned the new boutique, 91-room Sir Victor Hotel, formerly the Hotel Omm Barcelona, which is located on the famed central street Passeig de Gràcia that he added was being leased at very much above the average.
Mas-Sardá said not only have guests returned to Barcelona but that average spend has increased.
“In this line, the city continues to work on new proposals to increase the quality of visits,” he said. “The moratorium and administrative issues didn’t really affect visitors, although they had an impact on some of the planned hotel investments. … Barcelona is still among the top five urban destinations in Europe, (and) the city has increased the number of visitors at the Mobile World Congress and won the tender to host the (Integrated Systems Events) event, a big audiovisual congress with more than 100,000 visitors.”
The ISE event will be held annually in Barcelona, Mas-Sardá said.
He added he saw opportunities for international brands to invest in smaller family-owned and operated hotels for reconversion in areas near Barcelona.