Credit: Adobe StockThe “pretty girl of Europe”: Spanish hospitality faces operational realities
Market insights reveal realities of investing in Spain's thriving hospitality market amid labour shortages and licensing delays
October 27, 2025Real Estate
Written by Helen Richards
Key Takeaways:
Spain's hospitality real estate market continues to be a focus for global capital, buoyed by strong post-pandemic trends, but investment is increasingly shaped by local complexities, particularly regarding labour and administrative processes.
At the recent GRI Institute roundtable, Hospitality Investments in Spain, co-hosted by CMS, senior real estate professionals debated whether Spain can still claim the title of the “pretty girl of Europe”.
While some argue that other countries such as Italy may currently be outperforming, the consensus remains that Spain’s hospitality market is enjoying a positive trend, mainly linked to rising Average Daily Rates (ADRs), and its macro-attractiveness as the second-most visited country in the world after France.
The concept of 'bleisure' - the mix of business and leisure travel - has also gained traction, particularly in major cities. This trend is consolidated by Spain's successful positioning as an attractive destination for 'digital nomads', with Barcelona, Málaga, and Valencia ranking among the top five destinations in Europe for this group.
Major hospitality real estate market stakeholders gathered for the roundtable, Hospitality Investments in Spain. (Credit: GRI Institute)
Administrative Inefficiencies
A major point of concern is the lack of agility and legal security within Spain's administrative and political landscape. Licensing and permit delays are a recurring problem, often frustrating the business plans of investors and causing significant overruns.
This unpredictability is amplified by a political environment that can introduce regulatory changes, such as the moratorium in Barcelona, fundamentally changing the economics of a project.
The Labour Crisis
The acute labour shortage, particularly in seasonal and high-demand areas like Ibiza, remains a significant operational challenge. This is compounded by the historical fragmentation of the Spanish market, which is dominated by small, often un-professionalised, family-run enterprises.
A structure such as this makes it difficult for small hotels to compete against major brands in terms of marketing and operational efficiency, especially when attempting to professionalise and pay market salaries.
In response to rising costs and labour scarcity, efficiency and automation are becoming paramount. The adoption of lean operating models, which rely on minimal staff and digitised customer service, is viewed as a model for reducing the "most complicated" component of hotel management: the staff.
Thank you to our co-host CMS, as well as Javier Colino (CMS), Bernardo Lazcano (Activum SG UK Advisors Limited), Jesús Abellán Gómez (Arum Group), and Paula León Arias (Banco Sabadell) for their valuable contributions to the discussion at Hospitality Investments in Spain.
Key Takeaways:
- High-end tourism and rising rates are driving Spain's hotel market, supported by new luxury brands and the growing appeal of 'bleisure'.
- Investment in secondary Spanish cities is challenging due to difficulties in achieving high tariffs and low liquidity, often requiring unique concepts and local government support.
- Operational risks, including slow and unpredictable administrative licensing processes and a severe labour shortage, pose the biggest hurdles for investors.
Spain's hospitality real estate market continues to be a focus for global capital, buoyed by strong post-pandemic trends, but investment is increasingly shaped by local complexities, particularly regarding labour and administrative processes.
At the recent GRI Institute roundtable, Hospitality Investments in Spain, co-hosted by CMS, senior real estate professionals debated whether Spain can still claim the title of the “pretty girl of Europe”.
While some argue that other countries such as Italy may currently be outperforming, the consensus remains that Spain’s hospitality market is enjoying a positive trend, mainly linked to rising Average Daily Rates (ADRs), and its macro-attractiveness as the second-most visited country in the world after France.
Driving Forces and Product Evolution
A significant driver of the increased rates and market confidence is the emergence of new luxury brands and operators in the last decade, such as Four Seasons and Mandarin Oriental, which has elevated Spain's luxury segment. This new wave of high-end tourism is largely supported by demand from North America, specifically the US and Canada, creating a new type of high-spending visitor.The concept of 'bleisure' - the mix of business and leisure travel - has also gained traction, particularly in major cities. This trend is consolidated by Spain's successful positioning as an attractive destination for 'digital nomads', with Barcelona, Málaga, and Valencia ranking among the top five destinations in Europe for this group.
The Secondary Market Dilemma
While primary markets like Madrid, Barcelona, the Balearic Islands, and the Costa del Sol remain the focus for liquidity and repositioning work, secondary locations present a complex risk/reward calculation.- Valuation Challenges: In cities like Córdoba, the difficulty in justifying tariffs of over EUR 250 makes investment challenging. Similarly, Bilbao is seen as a strong business market, but with tariffs generally under EUR 220.
- Need for Creation: Success in secondary locations hinges on creating a unique concept and value proposition. This requires the effective combination of a strong brand, a dedicated operator, infrastructure improvements, and collaboration from the administration.
- Investor Profile: Outside the key locations, the market is described as the domain of domestic investors who are more adept at navigating the specific local dynamics.
Major hospitality real estate market stakeholders gathered for the roundtable, Hospitality Investments in Spain. (Credit: GRI Institute)Operational Hurdles
The core challenge for new investors is the operational complexity of the hotel industry, which is an industry first, and real estate second. Experts advise new entrants to start with simple models, such as two- or three-star hotels, which have a significantly easier operation and less staff complexity than luxury five-star assets.Administrative Inefficiencies
A major point of concern is the lack of agility and legal security within Spain's administrative and political landscape. Licensing and permit delays are a recurring problem, often frustrating the business plans of investors and causing significant overruns.
This unpredictability is amplified by a political environment that can introduce regulatory changes, such as the moratorium in Barcelona, fundamentally changing the economics of a project.
The Labour Crisis
The acute labour shortage, particularly in seasonal and high-demand areas like Ibiza, remains a significant operational challenge. This is compounded by the historical fragmentation of the Spanish market, which is dominated by small, often un-professionalised, family-run enterprises.
A structure such as this makes it difficult for small hotels to compete against major brands in terms of marketing and operational efficiency, especially when attempting to professionalise and pay market salaries.
In response to rising costs and labour scarcity, efficiency and automation are becoming paramount. The adoption of lean operating models, which rely on minimal staff and digitised customer service, is viewed as a model for reducing the "most complicated" component of hotel management: the staff.
Thank you to our co-host CMS, as well as Javier Colino (CMS), Bernardo Lazcano (Activum SG UK Advisors Limited), Jesús Abellán Gómez (Arum Group), and Paula León Arias (Banco Sabadell) for their valuable contributions to the discussion at Hospitality Investments in Spain.