In 2021, investments in the hospitality sector in the Balearic Islands grew by 69% year-on-year, and the total volume exceeded EUR 550,000,000. This makes the region one of the key destinations for hotel investment in Spain.
In 2022, the archipelago expects an even stronger increase in the investments number in this sector than a year earlier, according to the consulting company CBRE. Institutional investors will be the key source of incoming funds.
Thanks to the consolidation of international demand for resort holidays, in the sphere of interest of which Spain falls, as well as the general development of the region during recent years despite the pandemic, the Balearic Islands have become one of the most attractive and developed destinations for national and international holidays. As a consequence, the islands attracted the attention of numerous major international investors.
However, the distribution of investor interest in the archipelago is uneven. About 70% of all real estate purchase transactions take place on the island of Mallorca. One important reason is the low dependence of the island on air routes. Also, Mallorca, so far, enjoys less seasonal demand from tourists than Ibiza or Menorca. The prices for the offer are lower and buying it now, “for future growth”, is quite profitable.
Speaking about the nature of the acquired assets, it is worth noting that in 2021 the majority of transactions were made in relation to various 3- and 4-star hotels and resort facilities. Only 20% of the invested properties belong to the upmarket category.
One of the most significant transactions in the Balearic Islands in 2021 was the purchase of the H10 Punta Negra Boutique Hotel, a 4-star development with 135 rooms located in the municipality of Calvia. Another significant deal was the purchase of the Iberostar Selection Santa Eulalia hotel in Ibiza. The seller was a Mallorca-based company that purchased the property just 8 months earlier, in October 2020.
2022 Forecast
The beginning of 2022 was marked by an important deal: purchase of the 5-star hotel "7 Pines Resort Ibiza", located in the municipality of Sant Josef de Sa Talaia in the west of Ibiza. The property was sold for EUR 130,000,000. There are 185 rooms, which makes each room cost EUR 700,000. As for the 1st quarter of the year, it makes sense to note purchasing the Tres Playas hotel, located in Colonia de Sant Jordi, in Mallorca.
Tonia Vera, director of the CBRE branch in the Balearic Islands, points out: “This region of Spain has the largest share of investment in the hotel sector within the entire country. During the first 3 months of this year, 24% of total investments were performed in the archipelago market. And the outlook for the rest of the year is even better, although there are some issues that need to be addressed if the Balearic Islands is to maintain its leadership at the national level. We are talking about the lack of a clear structured scheme for selling properties and the lack of affordable traditional financing from banks through lending.”
Gradual Recovery of Hospitality Sector
In the fourth quarter of 2021, the hotel sector of the Balearic Islands began to show signs of recovery, although it did not reach pre-pandemic levels (note that we are talking about indicators 30% below the results of 2019). At the same time, the recovery of the tourism sector, especially compared to the historically low performance of 2020, has been extremely impressive. More than 5,000,000 people arrived in the region, the number of overnight stays in hotels increased by 340% compared to the previous year and reached 24,600,000.
The recovery of the sector also stimulated the growth of domestic demand, although its volumes are still far from competing with foreign ones. The share of the latter in total demand was 85%. Germany became the country from where most foreign tourists came. Visitors from this country accounted for 37% of the total demand from foreigners. The Germans were followed by the British (17%) and the Dutch (11%) tourists. The number of international visits is expected to reach 2019 levels by 2024.