Iberian Hotel Market - Savills
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November 2020
Iberian Hotel Market
33 Margaret Street Paseo de la Castellana, 81 Praça Marquês de Pombal, 16
London W1G 0JD 28046 Madrid 1250-163 Lisboa REPORT
+44 (0)20 7499 8644 +34 913 10 10 16 +351 21 313 9000 Savills Research
Foreword
Contents
A great growth cycle 03
outstanding demand growth
strengthening the Iberian market’s
position as the world’s largest touristic
destination (over 110 million international
visitors), with stable inventory slowly
evolving in terms of product offering and
branding to generate healthy growth
of commercial parameters, but still
maintaining high growth potential as
regards ADR and seasonality
The world biggest touristic 07
destination
with a diverse urban offering for the
corporate and leisure traveller and a
uniquely heterogenous universe of
coastal destinations on three seas
for all client profiles, with prime
destinations consolidated among
both urban and resort segments and
up-and-coming, attractive second
tier destinations
Foreword: hot views An unprecedented shock
resulting in a more than 70% drop in
11
disruption & opportunity touristic activity due to lockdowns
and travel restrictions, an economic
aftermath which is yet to be seen
and changes to consumer and
At the end of 2019, concerns for the Iberian solution to the pandemic, and despite some
corporate trends
hotel market (Spain and Portugal), consolidated optimistic predictions that tourism will
as the world’s largest touristic destination rebound quickly and strongly, we do not
after a decade of great demand expansion, foresee significant elimination of travel Certain recovery 15
contemplated a potential – then thought to be restrictions and the recovery of consumer to be consolidated between 2023
dramatic – drop in demand of up to 10%, derived confidence until Q2 2021, and expect and 2024 on the basis of the
industry’s proven resilience and
from threats of a recession and other external commercial activity to reach pre-COVID levels
strength after the decade of
events such as Brexit. by late 2023 or 2024.
expansion leading up to 2019, with
Within months, however, we ran into the The road to recovery will not be free from good signs beginning to emerge in
unexpected and truly dramatic outbreak of challenges, both old and new, including Brexit, terms of a medical solution to the
COVID-19, with its traumatic loss of human new consumer habits and corporate policies, pandemic and in Asian markets
life and healthcare system crisis, which struck administrative regulations and, above all,
particularly hard in Southern Europe. consumer confidence. Above all, we anticipate
The effects of the protective measures that pre-COVID trends will be reinforced New market, old trends 17
implemented throughout Europe and the rest with new values deriving from the current reinforced demand-driven trends
– experience, sustainability and
of the world are resulting in the worst drop ever situation, which will require further focus
digitalization – with new
in touristic activity, down over 70%, putting and management, but will continue to provide
requirements in terms of flexibility,
an abrupt end to a great decade of growth and attractive growth opportunities. safety and security and remote
profitability and hibernating the industry, which In a post-COVID world, with adjusted connectivity, continued evolution of
is currently surviving on the aid and incentive cash flows and financial pressure, there the operating model and additional
plans currently in place. will certainly be opportunities and further focus on refurbishment and
Despite the disruptive effects of COVID-19, concentration, but we do not anticipate a repositioning over new development.
the exogenous and non-structural nature of distressed market overall, as the immediate
the current crisis, together with the renewed effects of COVID are not likely to condition A consolidated and maturing 18
strength of our industry, the natural resilience of long-term value or have structural impacts. investment market
the market and what will hopefully be effective The disruptive effects of COVID will, on hold in 2020, to rebound strongly
application of the aid and incentive packages, however, provide for a window of opportunity, with the overcoming of the current
situation normalization, picking up
we have a very positive outlook for recovery in perhaps unique, for both value-add and core
concentration trends and
terms of both pace and strength. investors to capitalise on value opportunities opportunities for both the value add
While recent news provides reason to be in the largest, consolidated, yet growing, and core investment profiles, but
optimistic, providing visibility as to a medical touristic market in the world. without general market distress
2
A Great Growth Cycle A Great Growth Cycle
A great growth cycle allowing the Iberian
market to strengthen its position as Seasonality of the demand. Room nights in 2019
the world’s biggest tourist destination Spain
47.00
Portugal
20
50 43.21 18
A period of demand expansion reaching over 110 million international visitors and 37.10 37.55 16
over 400 million hotel room nights in 2019 after successive record-breaking, with 40 32.04 30.51 14
26.89
significant growth potential despite growth slowdown, uncertainties and challenges 30
21.52 8.18
9.56
18.35
12
10
7.15 7.59
16.59 5.95 6.50 6.36 8
Million
The tourism industry in Spain and Portugal, after the difficult increasing over 30% in Spain – which experienced over 40% 20 15.46 16.91
Million
4.60 4.07 6
“double dip” effects of the global financial crisis, has expanded to growth on a combined basis over the last decade – to more than 3.34 3.50
10 3.02 4
set successive records (7 years in a row) both in terms of traveller 83.5 million) and higher average expenditure per tourist, with a
2
volume, overnight stays and commercial parameters, performing slight reduction in the average stay.
0 0
above average as compared to the outstanding growth rates of Consequently, hotel room nights have increased, surpassing
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the industry worldwide despite the challenges it has faced, which 400 million on aggregate (up more than 30% over the
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have only provided for a slowdown in growth in the more recent last decade), consistent with continually outperforming
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years, and still with significant growth potential international market growth (accounting for over 65% of total
The key driver of this expansive growth cycle, consolidated hotel room nights). The growth trend has been diminishing, Spain Portugal
in large part beginning in 2012, has been the strength of the however, with 2019 being almost flat as compared to 2018 (a
Source: INE España / Turismo de Portugal
international leisure markets, which has led to the increasing slight adjustment in the Spanish market to 333 million room
arrival of international visitors, reaching over 110 million in nights, with Portugal reaching nearly 70 million, 3% growth
2019 (almost doubling in Portugal to reach nearly 27 million and over 2018).
Improving hotel offerings with moderate hotel inventory growth and greater
focus on refurbishment and repositioning rather than development, in a still highly
Evolution
Spain of the demand. Travellers and Room nights
Spain by P
origin
ortugal in Spain and Portugal Spain Portugal Portugal
20 20
fragmented property structure 20
with low penetration by international brands
47,00 47,00 47,00
Room
50 Nights 43,21 Travellers Room50
Nights
18 Travellers
43,21 50 18 43,21 18
37,55 37,55
The hotel supply has been relatively stable since 2008,
37,55
growing focus on refurbishment rather than development.
37,10 16 37,10 16 37,10 16
40 32,04 40 14 32,04 40 14 32,04
with steady growth but limited to a CAGR of 14 1.7% (over 4% in The increasing investment in refurbishment has been a
30,51 30,51 30,51
26,89 9,56 12 26,89 9,56 1226,89
Portugal and just
9,56
over 1.2% in Spain), compared
12
to the close growing trend in the past few years as investors have focused
30 8,18 30
18,35 8,18 30 18,35 to 3%8,18
growth in hotel room nights.
18,35 This moderate growth has on improving existing inventory standards, adapting to
21,52 7,15 7,59 10 21,52 7,59 21,52 10 7,59 10
16,59 5,95 6,50 6,36 16,9116,59 5,95 6,50 7,15 6,36 16,5916,91 5,95 6,50 7,15
been in part due to the financial
6,36 restrictions
16,91 deriving from demand trends and improving efficiency, and upgrading
8 8 8
Million
Million
Million
20 15,46 20 15,46 20 15,46
Million
Million
Million
4,60 4,60 4,60 the global financial crisis (GFC), which delayed
4,07 6 4,07 6 4,07 6 development categories and requirements deriving from the entry of
3,34 3,50 3,34 3,34
3,50 projects, the increasing town planning restrictions
3,50 and the international brands (repositioning).
10 3,02 10 3,02 4 10 3,02 4 4
58% 56% 58% 61% 64% 65% 65% 64% 66% 66% 66% 64% 66% 66% 69%271% 69% 70% 73% 72% 71% 70% 2 2
0 0 0 0 0 0
42% 44% 42% 39% 36% 35% 35% 36% 34% 36% 34% 36% Evolution of the Supply. Number of rooms in Spain and Portugal
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34% 34% 31% 29% 31% 30% 27% 28% 29% 30%
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1200 30
Spain Portugal Spain Portugal Spain Portugal 1,040 1,058 1,074
956 965 972 995 1,005 1,027
908 934
1000 892 25% 28% 25
20% 23%
Source: INE España Source: Turismo de Portugal 11% 17% 19%
11% 11% 11% 11% 11%
800 20
75% 72%
80% 77%
Thousands
International demand is heavily concentrated in the European
Thousands
Iberian Market total visitors 2019 600 89% 89% 89% 89% 89%
89% 83% 81%
15
Union (and Switzerland), accounting for over 75% of international
visitors. While uncertainty over Brexit conditioned forecasts, Rest of the 400 10
our main source market the UK; on its part the denominated FSR World
(France, Belgium and Switzerland) is closing the gap, with a very Latam 10.1% 5
200
5.7%
positive growth trend, as is the German market (these three markets
USA 0 0
combined account for close to 50% of total international visitors). UK
5.7% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
For its part, despite the relative strength of the LATAM markets, due 21.5%
Rest of Europe
to the historical ties of both Spain and Portugal and clear potential, 7.9% Spain Portugal Establishments
FSR
long-haul travel is still lagging (comparatively low in major cities as (F+B+S)
compared to comparable European cities of reference). Netherlands 18.4%
4.5%
A key challenge of the market pre-COVID was to provide for Italy Source: Turismo de Portugal
further growth potential, overcoming the historical seasonality of 5.4%
the market based around sun and beach leisure (concentrating close Nordic Country Germany The traditional family base ownership of the hotels in with an increasing but still timid foreign international brand
to 65% of total hotel room nights between April and September). 7.9% 13.1% Iberia results, on top of a fragmented industry structure (with presence (less than 10% and mainly through corporate
This had slowly been becoming a reality as the industry was Total 110,5 million close to 75% independently-held and small operator-owned), acquisitions), providing for outstanding opportunities in
evolving in more recent years to upgrade its product and revamp its (75.57% Spain and 24.43% Portugal) in very limited penetration by large operators and brands (the terms of repositioning and concentration of the industry.
marketing to reach new markets with alternative motivations. top 60 operators hold less than 35% of total hotel inventory),
Source: INE España / Turismo de Portugal
savills.com/research 3 4
A Great Growth Cycle A Great Growth Cycle
Healthy growth of commercial parameters throughout an expansive decade, with
outstanding consistent annual growth rates and overperforming pre-GFC peak levels
The industry’s commercial parameters have shown a rate. These parameters were significantly outperformed by both
combination of expanding demand over a stable inventory the selected (excluding interior and alternative products) urban
and a slowly improving product offering. This has provided (RevPAR of EUR 72.82 with an ADR of EUR 98.80 and 73.7%
for a very healthy growth rate (CAGR of close to 5.5% in occupancy) and leisure (RevPAR of EUR 75.10 with an ADR of
Spain and 6.5% in Portugal), based on ADR growth (3.0% EUR 96.40 and 77.9% occupancy) segments.
and 3.9%, respectively) and a similar trend in occupancy (in The growth is, in large part, derived from the leisure segment,
line at 2.3%), reaching RevPAR growth of 20% over the 2008 with a moderate occupancy CAGR of 1.65% over the last decade,
peak (pre-GFC). The growth trend began in 2012 and peaked but an outstanding 4.2% of ADR growth (outperforming the
between 2014 and 2017, in line with the expansion of demand corresponding 2008 level by almost 38%). The urban segment
(both international and domestic). has provided for an interesting yet more discrete CAGR of ADR of
In 2019, the Spanish market had a RevPAR of EUR 61.20 on the 2.4% (barely reaching 2008 levels) and a much more appreciative
basis of a still low ADR of EUR 91.00 and a good 67.3% occupancy 2.5% annual occupancy growth.
Evolution of the Commercial Parameters in Spain
€ 80 70%
€ 70 60%
€ 60 59 59 61
50%
54
€ 50 50 49
44 44 40%
€ 40 40 40 41
38
30%
€ 30
20%
€ 20
€ 10 10%
64% 59% 55% 57% 56% 57% 59% 62% 66% 67% 67% 67%
€ 0 0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Occupancy (%) RevPAR Urban RevPAR S&B RevPAR Spain
Evolution of the Commercial Parameters in Portugal
Source: Exceltur
The Portuguese market reached a RevPAR of EUR 49.47 by its three prime destinations, including Port (RevPAR CAGR of € 80 70%
2019 with a meritorious ADR of EUR 94.42 but still a very modest 7.09%), Algarve (6.94%, although still heavily seasonal) and € 70 60%
52.4% occupancy rate. Market growth is mainly derived from Lisbon (6.89%), which is continuing to consolidate.
€ 60
50%
€ 50 48 49
47 40%
€ 40 40
35 30%
€ 30 29 30 32
28 28
20%
€ 20
€ 10 10%
42% 43% 41% 44% 45% 48% 51% 53% 52% 52%
€ 0 0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Occupancy (%) RevPAR Lisbon RevPAR Porto
RevPAR Algarve RevPAR Portugal
Source: Turismo de Portugal
The growth curve was slowing down as of 2019, with progressive reduction of seasonality and upgrading by
mild concern for 2020 derived from the much-anticipated repositioning (guest profile), as a consequence of ongoing
potential recession, socio-political occurrences (including industry repositioning (products and brands) and the
Brexit and other events in the political arena) and widening heterogeneity of the many different destinations found
appeal of alternative destinations. within the world’s biggest touristic market (everything
However, the market’s potential remained, as the under the sun).
savills.com/research 5 6
The World’s biggest touristic market The World’s biggest touristic market
The world’s biggest touristic market
with a diverse urban offering for the
PORTO
PORTO
2019 vs 2008
Room Nights 10,720,425 142%
corporate and leisure traveller Occupancy Rate
ADR
52.4%
81.29
9%
71%
Revpar 42.6 85%
The city or urban segment accounts for almost half of total (on average). Among them, Malaga and Port have consolidated
visitors but only approximately 30% of total hotel room nights their positioning significantly, together with Palma and San
and inventory; traditionally powered by the corporate and MICE Sebastian, while Seville, Valencia and Bilbao started to achieve
segments, in recent years the biggest growth has been derived attractive growth levels in the later years of the decade. SEVILLA
SEVILLA
from the leisure segment and the “Bleisure” trends. The urban segment’s growth potential assumes a 2019 vs 2010 vs 2008
Destinations within the Iberian market can be segmented into continuation of the development of key industry trends:
Room Nights 5,840,969 75% 82%
prime (Barcelona, Madrid and Lisbon), second tier (including repositioning with further segmentation, development of new Occupancy Rate 79.10% 42% 28%
Seville, Palma, Valencia, Malaga, Port, Bilbao and San Sebastian), segments and niche products to capture alternative markets ADR 96.8 24% 10%
other capitals and regional cities. and profiles, adapting to evolving consumer demands focusing Revpar 76.5688 75% 40%
Barcelona, despite recent events including the socio-political on the experience for increasing leisure and new Bleisure and
situation (both in the city and in the region) as well as the 2017 traditional corporate clients, on top of the growing relevance of
terrorist attack, continues to hold the highest RevPAR at EUR digitalisation and sustainability.
108.7 in 2019 based on international demand of over 85% and high VALENCIA
VALENCIA
occupancy rates (81%) and Euro level ADRs (EUR 134.2). Madrid,
2019 vs 2010 vs 2008
with a RevPAR level of EUR 80.8 in 2019, has been increasing its
growth pace (77.9%) and undergoing a profound repositioning, Room Nights 4,345,817 34% 34%
Occupancy Rate 77.30% 32% 30%
which is yet to manifest itself in ADR (EUR 103.9) – still very far
ADR 87.7 25% -2%
from its potential (it should be more in line with Barcelona and
Revpar 67.7921 65% 28%
other comparable European cities). Lisbon has already shown
great growth rates, reaching a RevPAR level of EUR 74.3 in 2019
with a strengthening ADR level (EUR 122.9) but still having a
discrete occupancy level (60.4%) and also providing for good MÁLAGA
growth potential. MÁLAGA
Among the selected second tier destinations, all have 2019 vs 2010 vs 2008
overperformed reference market segment RevPAR CAGR, and Room Nights 2,785,302 75% 100%
have improved upon the pre-GFC 2008 peak by close by over 35% Occupancy Rate 78.70% 38% 23%
ADR 99.2 40% 15%
Revpar 78.0704 93% 41%
MADRID
MADRID BILBAO
BILBAO
2019 vs 2010 vs 2008 2019 vs 2010 vs 2008
Room Nights 20,676,110 36% 48% Room Nights 1,886,187 55% 78%
Occupancy Rate 77.90% 21% 16% Occupancy Rate 75.00% 18% 18%
ADR 103.7 36% -10% ADR 97.8 32% -1%
Revpar 80.8 46% 4% Revpar 73.35 57% 17%
BARCELONA
BARCELONA SANSEBASTIÁN
SAN SEBASTIAN
2019 vs 2010 vs 2008 2019 vs 2010 vs 2008
Room Nights 21,332,211 41% 84% Room Nights 1,421,668 44% 64%
Occupancy Rate 81.00% 17% 12% Occupancy Rate 72.50% 10% 13%
ADR 134.2 34% 8% ADR 140.6 48% 16%
Revpar 108.702 57% 21% Revpar 101.9 63% 32%
LILISBOA
SBOA PALMADE
PALMA DEMALLORCA
MALLORCA
2019 vs 2008 2019 vs 2010 vs 2008
Room Nights 18,425,019 114% Room Nights 8,979,437 23% 15%
Occupancy Rate 60.43% 1% Occupancy Rate 77.90% na 11%
ADR 122.90 81% ADR 110 na 55%
Revpar 74.3 82% Revpar 85.69 na 72%
savills.com/research 7 8
The World’s biggest touristic market The World’s biggest touristic market
The world’s biggest touristic market
with a unique universe of coastal
COSTA BRAVA
COSTA BRAVA
2019 vs 2010 vs 2008
Room Nights 11,753,177 15% 8%
destinations on three seas for all Occupancy Rate
ADR
64.30%
77.4
16%
31%
Revpar 49.7682 52%
client profiles
The Iberian hotel market has historically thrived based
on the attractiveness of its weather and coasts, as a sun and ISLASBALEARES
ISLAS BALEARES
beach destination, with about 70% of its total hotel inventory 2019 vs 2010 vs 2008
concentrated in coastal destinations. Room Nights 58,273,379 20% 17%
The coastal destinations have been the driver for industry and Occupancy Rate 78.67% 13%
growth and development in the last decade, still holding great ADR 112.73 73%
potential for future growth based on the ongoing transformation Revpar 101.7864 104%
and evolution which have been the basis for its ADR-based growth.
Its diversity provides for attractive submarkets for almost
any guest profile, from the islands (Balearic Islands and Canary
Islands) to the Mediterranean Coast (Costa Brava, Dourada,
Blanca and Sol), as well as the Atlantic options (Costa de la Luz,
Algarve and Green Spain). COSTA DORADA
COSTA DORADA
The greatest RevPAR growth has been achieved in the Balearic 2019 vs 2010 vs 2008
Islands (in particular, having nearly doubled its RevPAR level Room Nights 9,760,369 9% 12%
over the past decade based on outstanding annual ADR growth Occupancy Rate 67.90% 16%
of over 6%), the Canary Islands (very much in line with ADR ADR 84.2 34%
growth but stagnant in terms of occupancy), Costa del Sol (with Revpar 57.1718 55%
balanced occupancy and ADR growth) and Algarve (relying more
on occupancy growth).
Within the submarkets, certain specific destinations have
evolved into prime destinations, based on strengthened demand,
particularly of an international nature, and special destination
positioning, becoming comparable to prime city destinations. COSTA BLANCA
COSTA BLANCA
Among these jewels in the market, Marbella, Mallorca and 2019 vs 2010 vs 2008
Ibiza stand out as the upscale destinations, while southern Room Nights 17,330,805 22% 59%
Tenerife, Gran Canaria and Benidorm are the locations of Occupancy Rate 73.00% 20%
reference among the mass tourism destinations. ADR 76.2 30%
At the end of last year, the outlook for the coastal segment was Revpar 55.626 56%
very much conditioned on the final outcome of Brexit and the
development of alternative markets, with the added challenge of
reducing seasonality and increasing expanding profiles to allow
for additional growth in occupancy and ADR. Key strategies were
based on smart spending in repositioning, including rebranding,
product proposals, optimisation and sustainability. ALGARVE COSTA DEL SOL
ALGARVE COSTA DEL SOL
2019 vs 2008 2019 vs 2010 vs 2008
Room Nights 20,953,422 58% Room Nights 19,144,545 33% 16%
Occupancy Rate 49.6% 22.5% Occupancy Rate 75.50% 30%
ADR 110.09 49.3% ADR 98.7 27%
Revpar 54.6 83% Revpar 74.5185 65%
ISLASCANARIAS
ISLAS CANARIAS COSTADE
DELA
LALUZ
LUZ
COSTA
2019 vs 2010 vs 2008 2019 vs 2010 vs 2008
Room Nights 66,064,426 32% 34% Room Nights 3,872,373 11% 18%
Occupancy Rate 80.35% 16% Occupancy Rate 64,15% 21%
ADR 97.4 38% ADR 95.5 18%
Revpar 78.35 61% Revpar 61.22635 42%
savills.com/research 9 10
An Unprecedent Shock An Unprecedent Shock
An unprecedented shock ending
the expansion cycle with effects yet Evolution of Covid-19 and the Economy
to be seen The Iberian hotel market as a whole is by far the biggest worldwide travel destination with over 110 million
international visitors (ahead of France’s just over 89 million) in 2019, but more importantly tourism directly accounts
for well over 10% of Iberian GDP and employment.
Lockdowns, travel restrictions and consumer concerns are rendering the Spain was one of the hot spots in Europe during the first wave of the virus in Europe, suffering a dramatic loss of
worst expectations for 2020 a reality, with a drop in the travel industry human life especially among the senior, most vulnerable segment of the population, while Portugal was able to anticipate
almost seven times greater than that occurring post-GFC lockdowns before the virus spread. In any case, both countries, highly dependent on the international leisure markets,
have experienced a very significant blow to their touristic activity, with a similarly significant impact on their economies.
The direct effects of the COVID outbreak, as in many other and of course Iberia (flights in Europe fell from an average These effects have had a never-before seen impact on the Iberian economy, which has fallen much more than the EU
industries, have been especially dramatic for the tourism of 2,900 daily in January and February to 230 in April and average and is surviving on subsidised personnel and financial programs and administrative and financial moratoriums
industry as a consequence of lockdowns, travel restrictions and rebounded to 948 in June with the de-escalation of restrictions, deployed by the countries’ respective governments.
consumer safety concerns. only to fall again as restrictions were re-imposed).
According to the UNWTO, international travel has fallen by The third quarter showed some signs of recovery with the
Focus Economics Euro Area Spain Portugal
70% as of August 2020 as compared to 2019, consisting of a drop relaxation of lockdown measures, which were shattered in late
Noviembre 2020
of 700 million arrivals and an estimated loss of US$ 730 BN in July and August with the implementation of quarantines and
GDP -7.47% -12.84% -10.34%
export revenues from international tourism. related requirements. Early autumn brought a second wave (% Oct. 2020)
The impact of COVID, after an unstable and already affected which, although it has not yet proven to be as severe as the first, CPI -0.03% -0.63% -0.37%
first quarter of 2020, deriving from Asian markets, peaked is leading to a second dip owing to general travel restrictions and
GDP per capita vs 2019 -6.68% -11.37% -6.57%
during the second quarter with an unprecedented global closure selective lockdowns. The year-end outlook thus provides for a (forecast)
in which hotel room night numbers were down by over 95% as dramatic and unprecedented fall in line with the worst forecasts, Unemployment rate 8.36% 17.57% 7.90%
compared to 2019 across almost all markets, including Europe and the Iberian market has been no exception.
Tourism
3.90% 12.30% 19%
(% GDP) *2018
International Travellers Fall Tourism
(% Employment) 5.10% 12.70% 21.80%
20% *2018
0% Source: Focus Economics / World Travel & Tourism Council
January February March April May June July August
-20%
Year-end projections follow the same pattern, although it is expected that selective lockdowns and restrictions will
-40% provide for better control of the virus during this second wave and allow for de-escalation of restrictive measures in
-60% time for the holiday season.
In 2021, there is a potential risk of a third wave at the end of the winter season, which will hopefully be final and
-80% milder in nature, with better management and further improved treatment, so the outlook for the first half of the year
-100% remains tempered until a definitive treatment or vaccine is readily available.
-120%
Portugal Spain Europe World
Source: UNWTO
COVID-19 TIME LINE
WORLD WORLD
World leaders
1st COVID OMS declares 1st COVID Pfizer
commit to a total
case in the Public Health case in announces
of US $ 8 billion for
World emergency Latam (Brasil) 95%
the development
efficacy of
and deployment
European its vaccine
of diagnostics,
1st COVID 1st COVID treatments and agreement of
case in case in UK vaccines against the 750,000 M€
EEUU new coronavirus to grant aid
DIC 19 15 ENE 30 ENE 31 ENE 25 FEB 14 MAR 15 MAR 3 MAY 4 MAY 21 JUN 21 JUL 25 OCT 9 NOV 13 NOV
1st state of
alarm in Spain
1st COVID Spanish 2nd state of
case in Spain 1st state of Government alarm Spain
alarm in Portugal concludes the state
of alarm and the
De-escalation 2nd state of
de-escalation so
in Portugal alarm Portugal
the country enters
the ‘new normal’
IBERIA IBERIA
savills.com/research 11 12
An Unprecedent Shock An Unprecedent Shock
Seasonality and dependence on international markets have resulted in an Occupational Rates Fall In urban destinations vs 2019 Inventory Reduction
even deeper impact on the Iberian tourism industry
Zaragoza
Zaragoza
While demand during the first two months prior to the hotels after the lockdown with hotel inventory down to half of
Madrid
Madrid
outbreak of COVID-19 in Europe was stable (hotel room nights its capacity (vs. the same period in 2019). Despite the reduced
in line with 2019), Spain registered a devastating drop of 65.8% inventory, hotels in Spain recorded a 50% decline in RevPAR, Sevilla
Sevilla
in the number of travellers and 71.0% in the number of hotel mainly driven by drops in occupancy levels but also in ADRs, Cádiz
Cádiz
room nights accumulated to September with respect to 2019. which have dropped close to 25% on average. Málaga
Málaga
This drop was close to 98% in Q2 and just over 75% in Q3, Portugal implemented the lockdown before the virus had fully Córdoba
Córdoba
with international demand naturally suffering more (-79.4% spread but followed the same trend, with drops in hotel room Granada
Granada
international vs -55.2% domestic), especially following the nights of over 95% in Q2. Business improved during the summer
Palma de de
Palma Mallorca
Mallorca
imposition of non-anticipated restrictions by the UK, Germany season (Q3), due mainly to the amazing pick-up in touristic
and other countries, which shattered any hopes of salvaging the activity in the Algarve in August, where most of the European Alicante
Alicante
summer season. demand, especially British, was concentrated, and was running at Valencia
Valencia
The dramatic drop in demand has delayed the reopening of close to full capacity until the imposition of restrictions. Barcelona
Barcelona
Bilbao
Bilbao
Roomnights fall 2020 vs 2019 San
SanSebastián
Sebastián
santander
Santander
40%
AACoruña
Coruña
20% Santiago de Compostela
Santiago de Compostela
0% -100% -75% -50% -25% 0% 0% -25% -50% -75% -100%
il
ne
r
ly
ay
y
y
ch
t
be
us
pr
ar
ar
Ju
-20%
M
Ju
ar
Source: INE España
A
ug
nu
ru
em
M
b
Ja
A
pt
Fe
Se
-40%
-60%
-80%
-100%
-120%
Spain Portugal
Source: INE España/Turismo de Portugal
The overall effect on Iberia has been even more significant A key element to be considered in the near- and medium-
considering the natural seasonality of a market heavily term for the industry, together with visibility as to a medical
concentrated around the sun and beach summer season and its solution to the pandemic, above all, is the ongoing provision
dependence on international markets (over 65% of total hotel of government-implemented measures and the management Occupational Rates Fall In S&B destinations vs 2019 Inventory Reduction
room nights in 2019 and even more during the summer season). of the European aid package in order to reactivate the
The unprecedented fall in demand is seven times more dormant and impacted economy, and particularly the hotel Costa
Costa Brava
Brava
severe than that of the GFC and shockingly quick (compare a industry, by allowing for the necessary liquidity in the
Calvià Calvià
drop of 25% during the GFC over 2+ years with a drop of 50% financial system to permit working capital financing to be
with inventory levels at 50% over 3 months in 2020), and has available at assumable costs. Islas
Islas Baleares
Baleares
outpaced the worst projections ever anticipated. The trend is set to continue through the fourth quarter Salou Salou
The industry has since found itself in a paralysed state, to round out the worst year in Iberia as it relates to
Costa
Costa Dorada
Dorada
supported by the governmental assistance measures that have tourism with an unprecedented drop of over 70% in hotel
been deployed (including subsidies of personnel expenses, room nights as compared to 2019, and further into 2021, Benidorm
Benidorm
moratoriums and subsidised financing) and the financial health of until there is clearer visibility as to a medical solution to Costa
Costa Blanca
Blanca
the property structure that consolidated during the prior cycle. the virus.
Marbella
Marbella
Costa
Costa del del
Sol Sol
El puerto dede
El Puerto Santa María
Santa María
Costa
Costa dede
la la
LuzLuz
SanSan
Bartolomé de Tirajana
Bartolomé de Tirajana
Adeje Adeje
Islas Canarias
Islas Canarias
-100% -75% -50% -25% 0% 0% -25% -50% -75% -100%
Source: INE España
savills.com/research 13 14
Certain recovery beginning to take shape Certain recovery beginning to take shape
Certain recovery beginning In Iberia, the effect of the crisis was deeper given its
Resilience to previous crisis
to take shape
of the Spanish Hotel Market
dependency on international markets and deep impact on
the domestic economy, which also impacted the industry’s
recovery, also led by international leisure markets. 60%
The dramatic effects of the COVID-19 outbreak on the industry, despite The overall recovery of the market as measured by the RevPAR 50%
to pre-GFC levels took over 7 years; however, the “double dip”
being unique, unprecedented and severe, are of a one-time nature and are effect must be taken into account (the market bottomed out after
40%
60%
not structural, allowing for a positive outlook on recovery year 3, providing for a 4-year recovery period). 30%
50%
City destinations lagged behind as a segment, with a drop 40%
20%
The aftermath of COVID-19 will certainly bring new derived from a last-minute, cash flow-driven market and in RevPAR of more than 25% extended over a five-year period
30%
challenges and potentially changes to the industry, but a the aftermath of COVID-19’s economic effects. (double dip), conditioned by smaller destinations, non- 10%
change of paradigm is not expected as could be the case in As to the pace of the industry’s recovery post-COVID-19, competitive asset categories and the harsh effects of the crisis on 20%
10%0%
other industries or even in certain real estate segments. it will be important to take account the availability of the Iberian economy, but also by a transformation of the industry
16 2017
2010
20 2014
15 2016
20 2019
20 2018
20 2013
14 2015
11 2011
12 2012
20 2009
0 2008
In addition to the industry’s unique natural resilience, liquidity in the financial system, governmental incentives which is currently underway and has not yet been completed. -10%
0%
demonstrated in the wake of the GFC and already and the deployment and management of the European On the other hand, coastal destinations enjoyed a very -10%
10
17
-20%
9
8
19
18
13
0
20
20
20
20
20
beginning to take shape judging by indicators in Asian aid package, the recovery of complementary touristic fast recovery, driven by the international leisure market.
20
20
-20%
markets, supported by the globalisation of the right to players (particularly carriers and distributors in general) RevPAR dropped by 10% for less than three years and even -30%
-30%
vacation, accessibility to growing population segments and potential changes in consumer habits and corporate avoiding the double dip effect, outperforming pre-crisis levels -40%
-40%
worldwide and the corporate need to travel, the industry’s polices, as well as the ultimate outcome of other coexisting in less than 4 years, despite the weight of purely domestic
recovery is not in doubt. Furthermore, it is anticipated challenges such as Brexit and positioning of alternative destinations, which hindered the segment’s recovery. Urban S&B National
that the industry will also pick up on pre-existing trends, destinations.
Source: Exceltur
reinforced by certain additional features and values derived The base scenario, however, provides for a general
from the current situation. consensus anticipating that the industry’s upturn will
The market still assumes a difficult 2021, until medical take hold in 2022 and reach pre-COVID levels (on average, Improving Good Signs from Asia
advances arrive at a definitive remedy to control the virus, between 2016 and 2019) by late 2023/2024, maintaining its
hopefully within Q1 of 2021, in order to allow for the position as the world’s leading destination and touristic Commercial parameters and investment activity are lifted (although international restrictions are still in place).
recovery to begin and take hold before the summer season. save haven . picking up in Asia, supported by domestic markets given Performance as of September still shows weak
Operating under this premise, while some optimistic views The recovery is expected to be led by the leisure segment, the international travel lockdown. occupancy and ADR, mainly due to the absent international
foresee a strong rebound of demand once restrictions are driven principally by international markets, with short- and Asia and the Pacific, the first region to suffer the impacts market, but more importantly shows occupancy levels
lifted and perceptions of personal safety regained, experts mid-haul as the key drivers, while corporate travel and of COVID-19, recorded a 35% decline in arrivals during the surpassing the 50% marker and ADRs slowly picking up.
remain moderately cautious and expect a good level of long-haul will take longer, with MICE lagging until corporate first quarter of 2020, but is also showing signs of recovery The potential lifting of international travel restrictions will
occupancy but anticipate significant pressure on prices policies are relaxed (travel and expense restrictions). as of Q3 2020 as domestic travel restrictions have been certainly boost the market.
Proven Resilience, Strong Industry
Tourism has shown unbeatable strength marked by International Tourists Evolution Operative Parametres Asia and Pacific
continuous growth, consistently outperforming economic 1600
growth as it comes to be increasingly viewed as a personal 1400
USD
right, provides greater stimulus and continues to adapt 1200
to the needs and motivations of the customer. But more 1000 120 80%
importantly, the industry has shown a unique capacity 800 70%
to overcome unprecedented shocks including terrorism, 600 100
financial crises and, yes, epidemics, providing for the best 60%
400
empirical proof of the meaning of resilience. 80
200 50%
Over the last 20 years, despite the effects of 9/11, the
0
terrorist attacks in all major European cities, regional 60 40%
2010
2007
2014
2000
2107
2004
2006
2009
2008
2005
2001
2003
2002
2016
2019
2018
2013
2015
2011
2012
conflicts, social unrest in the Balkans and certain key
markets, and the successive global viruses, the only 30%
40
relevant drop is due to the effects of the GFC, which World Europe Spain 20%
effectively led to a 4% drop globally, just over 5% in Europe 20
and 10.5% in Iberia. Source: INE España y UNWTO 10%
0 0%
m 0
0
20
20
20
0
19
0
m 0
au 0
19
9
9
19
9
9
se 9
9
2
-2
-1
-1
l-1
-2
-1
1
-2
2
l-2
-1
n-
n-
r-
g-
b-
g-
n-
n-
r-
ar
pt
b
ay
ay
ju
ar
pt
ap
ju
ju
ja
fe
au
ap
ju
fe
ja
m
m
se
ADR in USD RevPar in USD Occupancy (%)
Source: Savills APAC
Investor sentiment is also starting to recover in the noticeable gap in pricing expectations between buyers and
region, with 80% of the activity concentrated in Taiwan, sellers and financing liquidity is very low.
Singapore and South Korea, although there is still a
savills.com/research 15 16
New market, old trends reinforced New market, old trends reinforced
New market, old trends reinforced and
new challenges
Considering the exceptional, exogenous nature of the current situation, An Evolving Operating Model Property Contract by Category
as the industry recovers, it is expected that pre-COVID-19 trends will pick During the past decade, the traditionally independent
Franchise
back up, potentially reinforced and possessing additional attributes and operating model has been progressively evolving as the demand- 2.36%
driven market has required product and operational adjustments.
requirements derived from the aftermath of the health crisis. As such, the capital and technological requirements for the
digitalisation and optimisation of marketing and operations,
Demand-Driven Market together with an ever-global market, a further competitive
Property
operating environment and a more sophisticated corporate 25.85%
The perception is that a renewed acceleration of interaction, now enriched with further product and service arena, have pressed for growing integration in operating groups
ultimate client-driven requirements will take place as flexibility; environmental and social sustainability, now and penetration by bigger brands.
disintermediation continues to grow in which hotels will enhanced with further safety and security needs; and, of This trend might be further reinforced by the guaranteed value of Independent
48.43%
need to offer a differential experience within the destination, course, even more, technology and digitalisation to provide for brands, especially now with safety and security protocols in place, Management
8.65%
with wider motivational alternatives and services and social further teleworking capacities. but more generally in line with the required consumer values.
Concurrently, the trend will lead to a progressive reduction
of fixed lease contract structures and a migration to variable Lease
14.71%
lease contracts, management and franchises, with the
Differential Experience + Further Flexibility continuous development of generic (white) brand operators,
although it will entail some uncertainty considering its weak
corporate structure. Source: Alimarket
This has on the one hand led to distancing of owners in terms
of management, but has also increased the involvement of Refurbishment Versus Development
Social & Enviromental Sustainability + Safety & Security financial investors in business risks, requiring a new approach at Development will be further conditioned by the expected
the levels of hotel ownership and corporate management. limitations on financing in the market and the required recovery
period (as well as by business considerations and town planning
Property Contract by Category restrictions), fostering even more investment in refurbishing and
repositioning, a clear pre-COVID-19 trend already.
Digitalization & technology + Teleworking capacities During the 2015-2019 period, the number of rooms
refurbished was almost 6 times the number of new rooms
4.88% developed. Investments focused on value-add refurbishing and
2.08% repositioning of significantly tired and outdated hotel offerings
All of this leads to new product proposals which will likely products (such as serviced apartments) that can deliver on new OTHER 4.59% from a commercial and operating point of view.
benefit the upper-level categories that are able to provide consumer values including, in addition to the experience, safety, 86.17%
differential features, guaranteed delivery and alternative security, sustainability and further flexibility. 2.27% New vs Refurbished inventory in Spain
44.24%
New Rooms Refurbished rooms
28.09%
HOTEL (*****) 10.35%
15.21% 5,936
2.11%
2019
42,521
37.48% 7,156
2018
11.04% 29,490
HOTEL (****) 23.31%
25.80% 7,441
2017
35,282
2.37%
6,572
20.21% 2016
35,501
3.07%
HOTEL (***) 13.02% 3,770
2015
61.16% 35,519
2.54%
Source: Alimarket
0% 20% 40% 60% 80% 100%
The new industry requirements at all levels, including
PROPERTY MANAGEMENT LEASE product proposals, digitalisation and sustainability, reinforced
INDEPENDENT FRANCHISE by new demand requirements and the evolving operating
model, will require additional focus on capital investments and
management to optimise asset value.
Source: Alimarket
savills.com/research 17 18A consolidating and maturing investment market A consolidating and maturing investment market
Consolidated and maturing investment
Number of Transactions by Region
market on standby to rebound (2016 - 2019)
Specific opportunities without general distress, with a potentially limited
window of opportunity as the industry continues to concentrate, always
subject to financing liquidity uncertainty. Costa Other Madrid
Barcelona
5.28%
Blanca Leisure 11.35%
2.35% 17.03%
During the expansion period, Spain and Portugal consolidated
Annual Direct Investment Costa del
their position as a hotel investment market with high liquidity, Sol 4.31%
reaching an average investment volume of over €2.5MM per year 2nd Tier
of asset-based transactions and over €3.5MM per year including Urban
Canarias 15.46%
corporate transactions. 6 10.96%
5.04
The institutional investor has been the driver behind the rise in
this investment trend, accounting for close to 70% of investments 5 Other
made in recent years, which is consistent with the consolidation of 3.84 Urban
3.65 Baleares
15.85%
hotels as an asset class within the European real estate market and 4 2.40 17.42%
particularly their entry into the resort segment. 1.03 0.38
2.62
The attraction to the Iberian industry in general and to the 3
resort segment in particular is based on its resilience, growth and
profitability value-add opportunities. Value-add opportunities 2 Source: Savills Research
derive from a very fragmented property structure (mainly in the
hands of independent owners and small and medium-sized hotel 1 2.62 2.81 2.64 3.27 While there will be opportunities in the market, the
groups), with outdated inventory in need of repositioning and low strengthened pre-COVID-19 capital structure of many operators
levels of penetration by international brands. 0 and owners, together with the support of aid packages to be
The core investor profile, traditionally focused on the prime 2016 2017 2018 2019 implemented (and monetary policy) and the industry’s resilience,
city destinations, has also started to expand to second-tier city along with equity available from investors, will prevent a
destinations and prime international resorts, with comprising Asset Corporate generally distressed market and may limit the window of
yields arbitrage in a market that is consolidated but still has opportunity that many expect to see.
considerable growth potential. Additional factors conditioning the transaction market will
Source: Savills Research be derived from liquidity in the senior financing market, which
could jeopardize the attractive low interest rate environment in
Investor Typology (Asset Deal) A direct effect of the COVID-19 outbreak has also been the the medium-term to favour real estate investment in general.
collapse of the market for transactions, as it has temporarily Finally, as industry trends also require, the financial
frozen the movement of capital, both equity and debt, limiting constraints imposed on mid-size operators will potentially
120% transactions to pre COVID-19 agreements, rescue capital and result in further concentration of the industry through
very few opportunistic investments. corporate transactions.
2.40 2.23 1.79 1.93
Overall, the year-end investment level will barely surpass The key to success in order to capitalise on this window of
100% 0% 1% EUR 1.0 billion (subject to any unanticipated year-end opportunity will be to embrace the investment momentum to
9% 2%
15% corporate transactions), but this figure is not indicative or benefit from favourable discounts but also to focus on value
17%
significant as it is heavily conditioned by Q1 transactions and fundamentals, rather than opportunistic pricing which
27%
80% 6% 21% (50% of total expected volume for the year, including the might never manifest or which could lead to underperforming
13%
Edition turnkey sale and the Elaia portfolio) and deferments destinations and assets in the long term.
20%
from 2019 (close to 70% of transaction volume, including most
22%
Q1 transactions, a portfolio deal in Canaries and a mixed-use
60% 23% complex sale in Barcelona). Only a handful of transactions
36% could be considered to reflect COVID’s impact (Beverly Park
auction, Stoneweg portfolio, Sercotel corporate deal) but
40% there are too few of them to permit conclusions to be drawn
41%
or trends to be identified.
46% Market apathy will disappear, however, as soon as visibility
44%
20% 30% as to the medical solution to COVID-19 is obtained. A key
differential element as it relates to industry investment
16% outlook is, together with the non-structural nature of
0% 3% 4% 5% the current crisis, the consolidation of hotel and resort
2016 2017 2018 2019 investment as an asset class investment in Europe. In fact,
there is a significant volume of equity focus in the industry,
% Family Office % Investment Fund institutional and private, ready to capitalise on opportunities
% Operator % Socimi on the part of both value-add investors searching for
distressed deals and more core investors focused on what
% Real Estate Company % Other have up until now been scarce prime assets and destinations
Source: Savills Research available at an adequate price (or at a discount).
savills.com/research 19 20Contacts
TEAM
George Nicholas Jaime Pascual Paulo Silva
Head of Global Hotels CEO Savills Aguirre Newman Head of Portugal
Juan Garnica Jorge Rosillo María Uriarte
Head Director Business Development Consultant
Hotels Southern Europe Hotels Southern Europe Hotels Southern Europe
Javier Oroz Sandra López Emma Gomez
Director Transactions Director of Valuations Director Hospitality Servicing
Hotels Southern Europe Hotels Southern Europe Hotels Southern Europe
Alberto Henriques Andrea García Jorge Clemente
Associate Capital Markets Senior Consultant Valuations Senior Consultant Hospitality
Portugal Hotels Southern Europe Hotels Southern Europe
Gabriela Martialay Marta Antón Sonia López Doriga
Senior Consultant Transactions Senior Consultant Transactions Consultant Transactions
Hotels Southern Europe Hotels Southern Europe Hotels Spain
Ramón Machín Agustín Marañón Jacobo Herrero
Consultant Consultant Consultant
Hotels Southern Europe Hotels Southern Europe Hotels Southern Europe
Oliva Aguirre Paz de la Puente Carmen de la Sierra
Analyst Analyst Analyst
Hotels Southern Europe Hotels Southern Europe Hotels Southern Europe
Savills plc is a global real estate services provider listed on the London Stock Exchange. We have an international network of more than 600 offices and associates throughout the Americas, the UK, continental Europe,
Asia Pacific, Africa and the Middle East, offering a broad range of specialist advisory, management and transactional services to clients all over the world. This report is for general informative purposes only. It may not
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written permission from Savills Research.
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