Spanish Hotel Market Urban Destinations christie.es TABLE OF CONTENTS Glossary 3 Introduction 4 Key Observations 5 2018 Overview 6 Air Accessibility 7 Introducing the Urban Hotel Destinations 9 Who are the Feeder Markets? 11 Seasonality and Average Length of Stay 12 Supply 13 KPIs 16 Outlook 18 Overnight to Bed Ratio 20 Barcelona 22 Madrid 24 YTD June 2019 Urban Destinations 26 Team 27 2 | Christie & Co GLOSSARY ADR – Average Daily Rate. It is defined as the income per room for the period divided by the total number of rooms occupied during the mentioned period b – Billion CAGR – Compound Annual Growth Rate C&Co – Christie & Co ECB – European Central Bank INE - Instituto Nacional de Estadística k – Thousand KPI – Key Performance Indicator m – Million Occ – Occupancy. Proportion of occupied rooms over the total number of rooms available in a given period OECD – Organisation for Economic Co-operation and Development PEUAT – Pla Especial Urbanístic d’Allotjaments Turístics. Urban plan for tourist accommodation in Barcelona RevPAR – Revenue per Available Room. Defined as room occupancy multiplied by the average achieved room rate or rooms revenue divided by the number of available rooms GDP – Gross Domestic Product var – Variation YoY – Year-on-year vs – Versus 3 | Christie & Co INTRODUCTION This report analyses 14 Spanish cities (Barcelona, San Sebastian, Palma, Cadiz, Malaga, Madrid, Seville, Bilbao, Valencia, Santander, Alicante, Cordoba, Granada and Santiago de Compostela), highlighting the evolution of their main hotel performance indicators in 2018, as well as YTD 2019 data, the future outlook of the markets and a comparison between the Overnight to Bed Ratio of Barcelona and Madrid with other European urban destinations. We have selected these cities according to their volume of demand and supply as well as their levels of RevPAR. Urban destinations have benefited from the healthy economic conditions in Spain, experiencing a robust recovery within the last few years. Also, urban hotels have consolidated as one of the most reliable tourism growth drivers in the country. Excellent connectivity, improvements in the hotel supply and the increase of hotel demand, sustained by the international segment and the recovery of the MICE segment, led urban destinations to reach record numbers in 2018. In 2018, Barcelona registered the largest volume of overnight stays in Spain and remained as the city with the highest RevPAR. Madrid is set to become a top European luxury-oriented destination, with seven five-star hotel projects in the pipeline. Seville, Bilbao and Valencia were the cities that experienced the most significant growth in both demand and hotel performance during the last years. Cities such as San Sebastian, Malaga, Palma and Cadiz benefit from being urban destinations by the sea, achieving the highest profitability levels after Barcelona. Whilst Madrid and Barcelona are the most sought-after cities for investors, other urban destinations are registering constant demand growth and investor’s interest remains high. Throughout this report we analyse the tourism and hotel fundamentals of each city, using public information sources that include: EXCELTUR, the National Statistics Institute (INE), AENA (Spanish Airports and Air Navigation), Ministerio de Fomento de España and Alimarket, as well as Christie & Co’s sources. 4 | Christie & Co KEY OBSERVATIONS EXCELLENT CONNECTIVITY All the analysed cities feature an airport. Together, these 14 airports represented 74.4% of the total passenger volume in Spain in 2018. All of them registered constant growth since 2014, with a +8.1% CAGR (2014-2018) DEMAND GROWTH Overnights volume in the selected cities increased by +2.9% in 2018, above the country average which recorded a flat variation of -0.1% REDUCTION OF SEASONALITY Whilst urban destinations are subject to slight seasonality, we noted a decrease in the dependence on the high season in 2018 AVERAGE LENGTH OF STAY The average length of stay was 2.3 days in 2018, below the 3.2 days national average and remained stable since 2014 INCREASE OF THE FOUR AND FIVE-STAR CATEGORIES Current hotel supply in the studied cities is weighted by the four-star and the three-star categories, representing 84.8% of the total room supply. However, most of the future supply due to open in the coming years will be a mix of four and five-star hotels (80.1% of future room supply) ADR AS THE MAIN PROFITABILITY DRIVER When compared with 2014, all the cities analysed registered in 2018 a positive RevPAR evolution, representing an overall growth of +6.9% (CAGR 2014-2018), sustained by +5.5% ADR increase and a lighter occupancy uplift of +1.3% 5 | Christie & Co 2018 OVERVIEW Destination RevPAR (€) ADR (€) Occ. (%) Barcelona 98.89 125.50 78.8 €98.89 Barcelona registered the highest San Sebastian 97.24 134.50 72.3 RevPAR levels in 2018 Palma 84.89 104.80 81.0 Cadiz 75.63 104.90 72.1 Malaga 73.92 94.40 78.3 Madrid 73.50 95.70 76.8 €134.50 Seville 71.97 93.10 77.3 San Sebastian registered the highest ADR levels in 2018 Bilbao 69.51 92.80 74.9 Valencia 60.55 81.50 74.3 Santander 54.75 82.20 66.6 Alicante 54.01 74.40 72.6 Cordoba 48.89 72.00 67.9 81.0% Palma registered the highest Granada 46.03 67.40 68.3 Occupancy levels in 2018 Santiago de Compostela 37.84 68.30 55.4 6 | Christie & Co Source: Exceltur AIR ACCESSIBILITY In 2018, the 14 airports represented 74.4% of the total air travellers in Spain. All airports registered a Madrid, Barcelona and Palma represented 52.0% of the total number of passengers in the country. steady increase in number of passengers since 2014, with a total CAGR of +8.1% (2014-2018). This With 57.9m passengers, the airport Adolfo Suárez Madrid – Barajas was the busiest Spanish airport trend continued in 2018 with a +6.8% growth. and the fifth in Europe, followed by the Barcelona – El Prat Josep Tarradellas Airport, with 50.2m (the second in the country and the sixth in Europe). These airports catered primarily for the overseas segment (72.6%), led by the UK (14.1%) and Germany (11.3%). Ryanair and Vueling were the low-cost airlines registering the highest volume of passengers, 17.8% and 16.8%, respectively, while Iberia was the most used full-service airline (9.2%). (8) 5.5m % % YoY CAGR Airport Ranking* Bilbao Airport Nat. Inter. 2018 4Y (13) 289k (9) 2.3m San Sebastian Airport 1 MAD 28% 72% 8.4% 8.5% Santiago Airport (12) 1.1m Seve Ballesteros-Santander 2 BCN 27% 73% 6.1% 7.5% Airport 3 PMI 24% 76% 4.0% 5.9% (2) 50.1m 4 AGP 14% 86% 2.1% 8.5% Barcelona-El Prat Josep Tarradellas Airport 5 ALC 11% 89% 2.0% 8.6% (1) 57.8m Adolfo Suárez Madrid-Barajas Airport 6 VLC 27% 73% 15.2% 14.0% 7 SVQ 50% 50% 24.9% 13.2% (6) 7.7m 8 BIO 57% 43% 10.0% 8.0% Valencia Airport (3) 29.0m Palma Airport 9 SCQ 76% 24% 3.0% 6.9% 10 XRY 49% 51% 8.3% 10.6% (5) 13.9m (14) 14k Alicante-Elche Airport 84% 16% 24.9% 14.7% Cordoba Airport 11 GRX (7) 6.3m 12 SDR 56% 44% 17.7% 7.8% Seville Airport (11) 1.1m FGL Granada-Jaen Airport 13 EAS 99% 1% 2.7% 4.2% (10) 1.1m Jerez de la (4) 19.0m 14 ODB 99% 1% 2.4% 5.8% Frontera Airport Malaga-Costa del Sol Airport 7 | Christie & Co Source: AENA * Number of passengers Santiago de Santander Bilbao Compostela San Sebastian Barcelona Madrid Valencia Palma Alicante Cordoba Seville Malaga Granada Total number of overnight stays 20m 500k Cadiz 8 | Christie & Co Bubble size relates to number of overnight stays INTRODUCING THE URBAN HOTEL DESTINATIONS 2018 NUMBER OF OVERNIGHT STAYS 20.2m 19.7m +3.6% CAGR +4.5% CAGR In 2018, the 14 cities registered a combined 31.1% AND TOTAL 4Y CAGR of the total number of arrivals (32.7m) and 21.9% of Madrid overnight stays (74.3m) in Spain. Barcelona While the number of overnight stays in the country remained stable (-0.1%) in 2018, affected by a slight decrease in the resort markets (-1.3%), demand in the analysed cities grew by +2.9% consolidating a steady growth trend since 2014 (+4.5% CAGR 2014-2018). As a result of the excellent accessibility, the economic stability and the qual- ity improvements of the hotel supply, the international segment has con- 9.2m 5.5m 4.2m 3.4m sistently increased (+6.1% CAGR) to represent 69.9% of the total overnight +4.4% CAGR +8.0% CAGR +6.2% CAGR +2.8% CAGR stays in 2018. Consequently, the hotel rates have risen and the domestic demand growth has slowed down (+1.3% CAGR), as more price sensitive than the overseas segment. Palma Seville Valencia Granada Domestic International YoY 2018 CAGR 4Y YoY 2018 CAGR 4Y Barcelona -6.4% -0.1% 4.3% 4.3% Madrid 0.7% 0.5% 2.8% 7.5% 2.6m 1.9m 1.8m 1.6m Palma 6.5% 1.3% 6.8% 8.3% +5.5% CAGR +4.7% CAGR +5.0% CAGR +2.7% CAGR Seville -2.8% 2.3% 9.9% 8.7% Valencia -0.6% 1.6% 7.4% 9.5% Malaga Alicante Bilbao Cordoba Granada 3.7% 4.2% 6.9% 10.7% Malaga 12.6% 1.6% 4.9% 4.8% Alicante 0.0% 2.3% 5.6% 8.6% Bilbao -0.1% -0.4% 6.7% 15.7% Cordoba -4.0% 4.0% 1.4% 8.0% 1.4m 1.3m 885k 578k San Sebastian 4.9% 0.1% 2.2% 5.5% +5.7% CAGR +3.1% CAGR +5.0% CAGR +5.0% CAGR Santiago de Compostela -1.0% 3.6% -5.7% 1.5% Santander -5.6% 2.1% 1.8% 6.4% San Sebastian Santiago de Santander Cadiz Cadiz 1.0% 1.9% -17.0% 4.6% Compostela Source: INE 9 | Christie & Co THE URBAN HOTEL DESTINATIONS Representing 53.7% of the total overnights in 2018, Barcelona and Madrid were the largest urban destinations in the country.