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MALAGA ASPIRES TO BE A NEW BARCELONA & COSTA DEL SOL IS RECOVERING AFTER THE CRISIS

Since our analysis about Bilbao and San Sebastian issued last July, and with the aim of deepening our knowledge of the cities mentioned in our study from March 2016 (“Hotel Market Review: Most Competitive Cities”), Christie & Co has travelled to Malaga to delve into the tourism reality of Malaga and Costa del Sol, both main destinations in Spain. Both the capital and the main municipalities of this part of the Andalusian coast grew considerably during 2015 and the first half of 2016, maintaining the interest for hoteliers and investors.

Main reasons which have boosted the interest in Malaga and Costa del Sol hotel sector  Important effort by the municipalities in the cultural, architectural and environmental matters.  Multiple initiatives undertaken by the local Government to fight against seasonality.  Province’s good connectivity by road, sea, rail and air connections.  Consolidation of Marbella as a "high end” destination due to a wide gastronomic and leisure offer.  Strong recovery of domestic & international tourism, reinforced with the emergence of new segments (ex. health & wellness) SPECIALISTS IN THE HOTEL SECTOR

MÁLAGA

Malaga has become, in a very short time, one of the We can’t forget that Malaga is a coastal city that attracts major players in the tourism sector of our country. The tourism by road, rail (well connected with Madrid), sea (with important efforts made by the City Council in recent an important increase of the number of cruiser’s arrivals to years had made the city of Malaga one of the most the city) and air. In relation to this, Malaga’s airport has appreciated destinations for those seeking a site that positioned itself as one of the most important of our combines an excellent offer of cultural, architectural country, receiving 14.4 million of tourists in 2015. This and environmental attractiveness. trend has continued during the first half of 2016, in which the airport has registered 7.3 million tourists. During the first months of 2016, the city reached an Evolution of the annual number of tourists in increase in terms of tourist arrivals of around 8% over Malaga the same period last year. This improvement was due 2009 - YTD 2016 to the recovery of the domestic demand as well as to the consolidation of international tourism, which grew by around 13% over the previous year (also a record).

524.304 581.153 The Málaga Town Council is making a special effort to 469.308 305.967 battle seasonality through the creation of tourist 402.421 492.150 561.980 attractions that allow tourists to travel to Malaga at any 526.029 247.429 time of the year. They are managing to convey the 440.383 449.108 441.987 219.448 image of Malaga to an all year round destination with an 460.178 455.563 472.146 attractive calendar of events designed for different 198.199 203.775 tourist profiles which covers the months in which 2009 2010 2011 2012 2013 2014 2015 Q1 Q1 traditionally there are lower occupancy rates. National International 2015 2016

Source: INE

KPI's Malaga 2009 - YTD 2016 Regarding hotel occupancy in Málaga, it has grown ADR (€), Occ (%) & RevPAR (€) exponentially over the years 2015 and 2016 at a higher rate than the number of hotel rooms offered in the city. 71,0% 73,1% 69,5% 61,8% 65,2% 63,7% During the first quarter of 2016, the city had already 56,9% 60,5% recorded an occupancy of 69.5%, representing an 52,4% increase of 9.1% Vs the first quarter of 2015. This growth has facilitated the increase of ADR, which 82,9 reached 73.7€ in the first quarter of the year (3.8% 71,1 72,3 68,3 67,4 72,0 76,1 71,0 73,7 55,6 47,1 51,1 45,2 51,2 more than the ADR recorded in the same period of 40,5 43,7 42,2 43,9 2015) achieving a RevPAR of €51.2 (13.3% higher than the one recorded in the first quarter of the previous 2009 2010 2011 2012 2013 2014 2015 Q1 Q1 year). These data indicates that there is still room for 2015 2016 more hotels in the city. ADR (€) RevPAR Occup. (%) Source: Exceltur

This significant improvement of the main KPI’s of Also, the port of Malaga has consolidated in recent years as Malaga’s hotel industry has been key for investors and the third most important in our country. Due to its hotel operators focusing on a city that is becoming increasing tourist value, there is a proliferation of new increasingly attractive for the sector. However, hotel projects aimed to refloating the cruise business. However, owners in Malaga, conscious of the current investors its high prices makes is less uncompetitive compared to its appetite regarding the city, have increased their price main competitors: Tangier or Cadiz. expectations, offering returns of around 5% per year, yields traditionally applied in cities like Madrid or Barcelona). Oficina de Madrid Oficina de Barcelona Paseo de la Castellana 18 Paseo de Gracia 11 7ª planta - 28046 Madrid Esc. B, 4º 3ª - 08007 Barcelona

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SPECIALISTS IN THE HOTEL SECTOR [email protected] [email protected]

COSTA DEL SOL

During 2015 Costa del Sol went back to the occupancy rates and average prices that the area achieved during 2007 and 2008.

EvoluciónOccupancy de la Ocupación rates in Costaen La Costadel Sol del Sol ADR rates in Costa del Sol 2009 Vs 2015 2009 Vs 2015 2009 Vs 2015

137,60 € 78,0%78,0% 77,4%77,4% 70,1%70,1% 66,0%66,0% 64,1%64,1% 100,90 €

74,30 € 69,50 € 67,20 €

49,6% 49,6% 65,6%65,6% 45,9%45,9% 65,0%65,0% 59,5%59,5% 119,20 € 68,00 € 95,10 € 63,30 € 66,60 €

Marbella Torremolinos Estepona Benalmádena Fuengirola Marbella Torremolinos Estepona Benalmádena Fuengirola

2009 2015 2009 2015 Source: Exceltur

Health and golf tourism, both growing, have enabled Costa del Sol to maintain its stable annual occupation, fleeing seasonality and consolidating average prices and occupancy rates. However, the hotels located on the Costa del Sol are currently benefiting from a significant percentage of tourism "borrowed" from other destinations with political instability, such as Greece, Turkey and Tunisia.

On the other hand, Marbella has established itself as a favourite site for those looking for a "high Evolution of the annual number of tourists in Marbella end" destination. The wide gastronomic and 2009 -2015 leisure offer available in between the towns of Marbella and Estepona allows international 366.334 450.413 tourists looking for a luxury vacation to consider 336.602 334.787 372.113 395.581 409.869 Costa del Sol as one of their favourite destinations. 238.258 235.519 237.900 192.667 175.673 197.048 230.912

2009 2010 2011 2012 2013 2014 2015 However, it should be noted the impact, in terms of hotel development, that the cancellation at National International the end of 2015 of Marbella’s Urban General Plan Source: INE approved by the Supreme Court can have in the Evolution of the annual number of beds & hotels in municipality. The planning situation in the Marbella municipality is nowadays a chaos that prevent 2009 - 2015 investments in new hotel developments. 71 70 67 55 58 60 With regard to Torremolinos, Benalmádena and 50 Fuengirola, these cities have recovered the market share lost during the economic crisis, 13.862 13.871 13.288 13.460 13.003 13.374 13.862 thanks to the return of international tourists and the recovery of domestic tourism. 2009 2010 2011 2012 2013 2014 2015 Beds Hotels Source: INE ¡FOLLOW US! christie.com | Twitter | LinkedIn