Luxury, Food and Beverage Return Madrid to Center of Spanish Hotel Recovery

Madrid, expected to lead urban RevPAR in Spain from 2024

Hotel performance data presented last September, at the International Society of Hospitality Consultants ISHC 2022 Conference in Prague, by STR , shows a more intense ADR growth in Europe in the hotel luxury segment. This data confirms that the luxury segment is now leading the ADR recovery in Europe, in contrast to the rest of market segments.

One of the submarkets experiencing this ADR upwards shift first-hand is the central district of Madrid, the capital of Spain: this is the area located around Madrid’s Puerta del Sol, Gran Vía Street and Alcalá Street.?

Since the arrival of 四季酒店 to in late 2020, a new wave of luxury hotel redevelopments is transforming the Spanish capital’s central area. Beautiful historic buildings are paving the way to a new breed of luxury and upscale hotel properties.?

The ADR tide is rising so much in this area that, it is even benefitting other 5-star properties located further away from Puerta del Sol, such as in the Barrio de Salamanca area.

In the Puerta del Sol district, several new global luxury brands are expected to add value to the refurbishment of former office buildings. Iconic brands such as JW Marriott and Nobu Hospitality , or French high-end brand Evok Collection , have projects earmarked there. Moreover, other luxury brands are expected to be officially announced shortly in projects such as the unique Pescaderías Coru?esas building, located next to the JW Marriott, or in the impressive Metropolis building, located in the intersection of Alcalá and Gran Vía streets.?

Metropolis is a project where Spanish restaurant company, Grupo Paraguas , in which Turkish group Do?u? Hospitality & Retail Group has a stake, will develop a small luxury hotel, several restaurants, a wellness centre, amongst other leisure offerings. Close by is in number 44, Alcalá Street, a building owned by 苏黎世保险 is expected also to put an end to its office use and get a new life in the luxury hotel space.

As a result of this hotel hyperactivity around Puerta del Sol, considered geographically, the centre of Spain, and officially ‘kilometre zero’ for the entire Spanish road network, at PHG Hotels & Resorts - Hospitality Consulting --- Consultoria Hotelera we expect Madrid’s RevPAR to rise above pre-pandemic levels, overtaking historic urban rivals such as Barcelona and San Sebastián. This RevPAR evolution should reach cruising speed starting in 2024 and 2025, when many of these redevelopment projects will start to come to market.

Additional Forces

Alongside this redevelopment enthusiasm that is taking place in the centre of the Spanish capital, there are three interesting trends that are clearly shaping also the area simultaneously.?

On one hand we can see the introduction in most of these projects of international global brands. The rising tide is pushing ADR levels higher in what is one of the most popular areas of Madrid. So, in most instances, the only way for hotel investors and owners to capitalise on this upwards pressure is by also adopting an international brand, for their new projects, that can keep up with maximizing revenue generation and that is capable of attracting affluent guests from markets such as the US, Asia, Latam and Northern Europe. Global brands under the umbrellas of 希尔顿全球酒店集团 , 雅高 or 万豪酒店 are ideally positioned to tap into the power of this wave.

Secondly, at PHG we are observing that the market positioning of these redevelopment projects is taking place mostly in the upscale or luxury segments. The presence of EDITION and 四季酒店 , already in operation, present a fantastic platform to jump on the luxury trend for those projects that follow. The confirmation that Nobu and JW Marriott are also planning to land in the central district only makes the case for the next luxury development coming along even more compelling.

To add onto this, the architectural beauty and appeal of the historic buildings located in this part of the town make the luxury proposition a no-brainer for both, architects, and interior designers.?

We foresee, however, that after this first wave of luxury newcomers, a second redevelopment wave will bring, later on, products that will be more suited to the ‘affordable luxury’ space (with lower ADR levels but similar focus on interior design).

Last, but not least, one of the few positive collateral effects from which the centre of Madrid has been able to benefit, during the pandemic, has been the tremendous rise in restaurants and cocktail bars activity in the city.?

During the Covid phase, the local Madrid government has been particularly adamant in allowing restaurant groups to expand their customers’ indoor space, by taking over public street exterior space, just outside of these outlets, and in many instances, by taking over car parking space also in the streets.

As a result of this business-oriented strategy by the local Madrid authorities, the F&B sector has been thriving during the pandemic all over town, in line with the surge in the adoption of online booking systems by the majority of these restaurants and bars. Today, it is almost impossible to get a table at any Madrid popular restaurant without a prior booking confirmation.?

Given this new F&B trend, the hotel sector has followed suit of this market shift and Four Seasons was a first mover in the Puerta del Sol restaurant area by introducing famous chef Dani García to its main restaurant in its rooftop. Also, Marriott’s Edition has introduced Peruvian chef Diego Mu?oz and Mexican chef Enrique Olvera to its two main property restaurants. Coming next, Nobu is of course expected to raise the bar in its new property in Alcalá Street, by bringing in the renowned chef Nobu Matsuhisa to Madrid. So, the stakes in the F&B space are getting higher and higher.

All in all, the historic Puerta del Sol area is reaching a turning point that is acting as a magnet for more luxury hotel developments. It will be interesting to follow up how the RevPAR power-struggle balance itself amongst the different Spanish cities in the coming years, as a result of these new dynamics.

Article by HNN Columnist, Ivar Yuste, Partner at PHG Hotels & Resorts and Board Member of ISHC

October 26, 2022

https://www.costar.com/article/828246334/luxury-food-and-beverage-return-madrid-to-center-of-spanish-hotel-recovery

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