Spain hotel investment is witnessing a significant shift as budget hotels outperform the luxury segment, accounting for 17% of total investments. This trend reflects changing consumer preferences and offers unique opportunities for investors in the hospitality sector. Explore the implications of this evolving market landscape.
The Spanish hotel market is undergoing a significant transformation, with budget hotels emerging as the frontrunners in investment attractiveness. Recent data indicates that budget hotels accounted for 17% of total hotel investment in Spain, outperforming the luxury segment, which captured only 14%. This trend is particularly noteworthy as the overall hotel investment landscape in Spain continues to evolve, with a total of 34 hotel assets and 3,634 rooms transacted by March 2025.
The Rise of Budget Hotels
Budget Hotels: A Growing Investment Segment
In the first quarter of 2025, budget hotels in Spain attracted nearly €100 million in investments, marking a fourfold increase compared to previous periods. This surge has positioned budget hotels as a significant player in the Spanish hotel investment market, capturing 17% of the total investment, which amounted to €564 million—a slight decrease of 2.2% from the previous year.
The budget segment’s performance is particularly striking when juxtaposed with luxury hotels, which accounted for only 14% of the total investment. Within the luxury category, five-star hotels represented 6%, while luxury hotels made up 8%. This shift in investor preference underscores a broader trend towards more resilient and inelastic investment opportunities, particularly in the face of economic fluctuations.
Key Transactions in the Budget Hotel Sector
Among the notable transactions in the budget hotel segment are the Hotel Motel One Barcelona, the Grand Teguise Playa, and the AC Barcelona Forum. These transactions reflect a broader trend of increasing investor interest in budget accommodations, which are perceived as more stable and less vulnerable to economic downturns compared to their luxury counterparts.
According to data released by CBRE, the dynamism of the Spain’s hotel investment market is evident, with medium-volume operations predominating. While portfolio rotations have diminished in prominence, accounting for only 4% of total investment, there is a growing interest in repurposing obsolete assets, particularly in urban centers, to accommodate hotel developments.
Investor Profiles and Preferences
Who is Investing in Spanish Hotels?
The investor landscape in Spain’s hotel market is diverse, with hotel chains and private investors leading the charge. Hotel chains accounted for 48% of the total investment, while private investors represented 25%. Notably, national investors dominated the market, comprising 56% of the total transactions, followed by French capital at 20%. This trend highlights the confidence of domestic investors in the Spanish hotel market and their commitment to capitalizing on emerging opportunities.
Urban vs. Holiday Segment Investments
Investment activity has been evenly distributed between urban and holiday segments, reflecting a balanced approach to hotel development. However, the geographical distribution of investments reveals a clear preference for certain locations. Barcelona emerged as the preferred destination for investors, capturing 45% of the total investment. The Balearic Islands followed with 17%, while the Canary Islands accounted for 13%. Other regions, including Andalusia and provinces in Catalonia such as Girona and Tarragona, also attracted significant investment.
Future Projections for Hotel Investment in Spain
Positive Outlook for 2025 and Beyond
Looking ahead, the investment forecasts for the remainder of 2025 are optimistic. The Hotel Investor Intentions Survey 2025 indicates that Spain will continue to be regarded as the most attractive destination in Europe for hotel investment for the second consecutive year. This positive sentiment is supported by a robust project portfolio, with approximately 220 hotels expected to open by 2026, adding around 23,000 rooms to the market.
Notably, 25% of these new developments will be high-end (five-star and five-star grand luxury), with a significant concentration in key areas such as Malaga, Madrid, the Canary Islands, and Cadiz. This diversification of hotel offerings is expected to enhance Spain’s appeal to a broader range of travelers, from budget-conscious tourists to luxury seekers.
The Shift Towards Repurposing Assets
An emerging trend in the Spanish hotel investment landscape is the increasing interest in repurposing obsolete assets, particularly office buildings, into hotels. This strategy not only addresses the growing demand for hotel accommodations in urban centers but also aligns with sustainability goals by maximizing the use of existing structures. Investors are recognizing the potential of transforming underutilized properties into profitable hotel ventures, further contributing to the dynamism of the market.
The Spanish hotel investment market is witnessing a remarkable shift, with budget hotels taking center stage and outperforming the luxury segment. As investors increasingly recognize the stability and resilience of budget accommodations, the landscape is evolving to meet the demands of a diverse clientele. With significant transactions, a diverse investor profile, and positive future projections, Spain is poised to remain a leading destination for hotel investment in Europe. The continued growth of the budget hotel segment, coupled with innovative strategies such as repurposing obsolete assets, will undoubtedly shape the future of the Spanish hotel market, making it an exciting arena for investors and travelers alike.
