Uncover the €6.7 billion investment in Spain’s Canary and Balearic Islands over five years. Learn about the booming real estate opportunities today!
In a remarkable display of confidence in Spain’s real estate market, the Canary Islands and the Balearic Islands have collectively attracted an investment of €6.7 billion over the past five years. This substantial influx of capital underscores the islands’ growing significance as key tourism destinations, driven by continuous improvements in infrastructure and enhanced connectivity to vital international markets, particularly in the United Kingdom and Germany.
Investment Overview
A recent report by Colliers, titled “Destination Islands Report: Canary Islands vs Balearic Islands,” reveals that the Balearic Islands have received €3.5 billion in investments, while the Canary Islands have attracted €3.2 billion. This investment surge not only highlights the islands’ status as major tourism engines in Spain but also positions them as pivotal players in the broader southern European tourism landscape. Notably, the islands account for approximately one-third of all international tourists visiting Spain and around 10% of those traveling to southern European destinations.
Infrastructure and Demand Dynamics
The report emphasizes that the sustained demand for both archipelagos is largely attributable to ongoing improvements in infrastructure. Enhanced connectivity has made these destinations more accessible, thereby attracting a steady stream of visitors. This growth in demand, coupled with a limited increase in hotel supply, has resulted in heightened occupancy levels and a significant rise in the average daily rate (ADR). Since 2019, the ADR in both the Canary and Balearic Islands has surged by approximately 35%.
In 2024, the Canary Islands recorded an impressive 72.9 million overnight stays, while the Balearic Islands reached 63.1 million. It is important to note that the Canary Islands benefit from a consistent flow of tourists throughout the year, whereas the Balearic Islands experience pronounced seasonal fluctuations, despite ongoing efforts to diversify their tourism offerings and reduce seasonality.
Supply Constraints
When examining the accommodation supply, the Balearic Islands boast a hotel capacity of 378,000 beds, which is 41% larger than the 268,000 beds available in the Canary Islands. However, the growth in hotel supply in both regions has not kept pace with the rising demand. The compound annual growth rate (CAGR) for hotel supply since 2019 stands at around 1%, indicating a restrained expansion of operational capacity across the islands.
This limited growth in supply, juxtaposed with increasing demand, has created a favorable environment for investors and operators alike. The report suggests that both archipelagos are transitioning towards a higher quality tourism model, prioritizing sustainability and attracting travelers with greater spending power. This shift is evidenced by a more than 50% increase in tourist expenditure over the past decade, positioning the Canary Islands and the Balearic Islands as second and third in national tourist spending rankings for 2024, trailing only Catalonia.
The Role of International Operators
In recent years, the entry of large international hotel groups into the islands has been notable. Collaborations, such as that between Grupo Piñero and Hyatt to operate the Bahía Príncipe brand, as well as the acquisition of local hotel chains, signal a growing interest from international players. However, despite these developments, the presence of large international operators in the hotel sector remains limited, accounting for less than 10% of the market share in both archipelagos.
The potential for growth among international operators is significant, particularly given that the dominant operating model in both destinations is ownership, with over 70% of hotels operating under this regime. The report identifies the formation of alliances and the entry of new international brands through the acquisition of established national hotel chains as key trends likely to shape the future of the islands’ real estate market.
The Canary Islands and the Balearic Islands are solidifying their positions as vital components of Spain’s tourism and real estate sectors. The €6.7 billion investment over the past five years reflects a robust demand driven by improved infrastructure and a growing influx of international tourists. As both archipelagos continue to evolve towards a higher quality tourism model, the potential for further investment and development remains promising.
With the ongoing entry of international operators and a focus on sustainability, the future of real estate in the Canary and Balearic Islands appears bright. Stakeholders in the industry must remain vigilant to the changing dynamics of the market, as they navigate the opportunities and challenges that lie ahead in these picturesque destinations.
