Unlocking the investment value in Iberian Hospitality

Due to the growth in the GRI Hospitality Club chapter, club members and their senior guests gathered in Madrid on 10th July for a private meeting dedicated to the trends, opportunities and challenges currently presented in the Iberian hospitality sector.

Moderated by Brian Betel (ASG Iberia Advisors), top tourist European destinations, Spain and Portugal were put under the microscope to understand what investment strategies might deliver long term capital gains. Some interesting conclusions about the ‘contamination’ of hospitality assets with mixed use, residential and retail were discovered as well as consensus amongst investors, hotel operators and developers that Madrid and Barcelona were to be the most fruitful for value add hospitality investments.

The smart money is heading to Spain but don’t underestimate potential in Italy, Greece, Northern Africa, Turkey and Portugal

Members discussed at length which European cities are ripe for hospitality investments as well as scrutinising the risk and reward profiles of the regions. However, full conclusions are reserved exclusively for GRI Club Members. Enquire about membership here.

Millennials are changing the game and the market must diversify their product offering

Millennials were said to have opened up the hospitality market considerably. Once the monopoly of mega brands and resorts and budget brands; serviced apartments, boutique hotels and mixed use products are exciting investors as a new way to diversify portfolios. Reflecting on the wider theme of real estate becoming a service driven asset, rather than that of a financial fixed income asset, most were optimistic about the growth in alternative hospitality investments. However, it was mentioned that to create liquidity, clear urban planning guidelines must be implemented to foster market confidence and transparency to make the numbers work for all.

Resorts require a smarter mindset to capitalize on new development potential

Resorts were unanimously agreed as a sweet spot, booming across Iberia and can offer much value in terms of development and regeneration. However, such investments cannot be taken too lightly as they require a large injection of debt finance as well as unique planning to create destinations that allow the asset to stand firm in the long term.

Investors see greater value in boutique models rather than international chain brands (with some good exceptions)

Interestingly, while big brands on paper are liquid, stable and offer transparency, boutique hotels are what most of our investor’s will be banking on because of they can bring to the long term revenue income. Some might say some branded operators have become so big and standardised that they are out of touch with the consumer needs’ and unable to spot opportunities as effectively as boutique operators. Others instead, are defending their dominant position by diversifying their brand portfolio to address such market changes and serve new demographics of weekend, global, business and luxury travellers.

Ultimately, our room concluded that investing in and working with boutique operators will add the most value, especially as they can spot underdeveloped opportunities that investors can manage to core and most importantly, they are in tune with client demands. In this new world of real estate, where the customer is king, the likes of Zoku, Yotel, The Student Hotel, and to an extent Airbnb, have the secrets of how to champion the hospitality investment and cycle. However, the question remains: can investors, operators, developers and lenders keep in pace and diversify their product offering to capitalise on this or will the market remain fragmented, ill in liquidity and only for a few brave pioneers?