Investors have poured money into area tourism in recent years, and performance numbers are growing.
MADRID–Hotel investment in the Spanish tourism mecca of the Canary Islands is setting new records as the sunny archipelago attracts increasing numbers of foreign visitors lured by a safe environment and improving tourism offers, according to a report released recently by consultancy Christie & Co.
“Investors like the Canary Islands because due to the weather, they are a year-round resort destination that has no seasonality issues,” said report co-author Amparo Gómez-Angulo, senior consultant at Christie & Co’s Barcelona office.
“Also, the islands have been developed and positioned as a great tourism destination for many years, and that is paying off,” she said.
According to the report, investors poured €2.6 billion ($2.9 billion) into the global Spanish sector last year, or almost two-and-a-half times the investment figure in 2014, with the sun and beach segment representing 54% of the total.
“Geographically, the intense investment activity in the Canary Islands (in 2015) stands out where the invested deals quintupled over the previous year, reaching €683 million, or $756 million (an increase of €547 million, or $605 million),” placing the archipelago as the leading investment region in Spain, according to the report.
The seven-island chain located in the Atlantic Ocean 60 miles off the coast of southern Morocco accounted for 28% of the total hotel investment in Spain last year and 33% of total hotel rooms. Long considered the “Hawaii of Europe,” the islands boast dramatic landscapes, lush jungles, world-class resort hotels, stunning beaches and fairly reliable tropical weather, with 90% of total visitors coming from outside Spain, mostly northern Europe.
Christie & Co said investment last year was dominated by domestic players such as the Barcelona-based H10 Hotels and the Hispania real estate investment trust, which purchased the Gran Hotel Atlantis Bahia Real and the Suite Hotel Atlantis on the island of Fuerteventura for €105 million ($116.7 million).
Foreign investors included Germany’s IFA Hotel & Touristik AG group, which bought the IFA Altamarena and IFA Catarina hotels for €47.8 million ($53.1 million); while a Chinese investment group snapped up the 406-room Barceló Santiago on Tenerife for an undisclosed sum.
Along with the purchases of existing hotels by investors, many chains and independent owners are upgrading their properties as guests become more demanding.
“We’ve just spent €11 million ($12.2 million) on refurbishing all our rooms, dining room and public spaces and putting in a new spa, a new gym with a sea view and a new solarium,” said Francisco Alameda, GM of the 391-room Sensimar Arona Gran Hotel & Spa on the island of Tenerife, a member of the Spring Hotels Group portfolio.
Inmaculada Ranera, Christie & Co managing director for Spain and Portugal, who co-authored the report, said that so far this year investors are holding back because of the political situation in Spain, where a general election in December and a rerun vote in June failed to deliver a national government.
“The interest and the intent is there and investors are wanting to close deals but there is this wait-and-see attitude,” she said. “I believe we would have seen much more activity without the political uncertainty here in Spain.”
Along with the increase in investment, hotels in the Canary Islands also are performing well, according to the latest statistics from HNN parent company STR.
Through May 2016, Canary Islands hotels averaged an occupancy rate of almost 85%, up 5.4% over the same period in 2015. Similarly, average daily rate increased 10.5% to €109.72 ($121.93) and revenue per available room grew 16.4% to €93.09 ($103.45) over the first five months of 2015.
Hotel analysts and operators attribute much of the increase in guest numbers and demand to the domestic troubles and terrorism in competing Mediterranean-region destinations.
“Political instability in Tunisia, Egypt and Turkey, an example of which we have just seen, is channeling to the Canaries foreign tourists who once spent their holidays in those countries,” said Jorge Marichal, president of ASHOTEL, an association which represents about 250 hotels on five of the islands.
Alameda agreed and said he observed a new influx of northern European guests to the island, especially in the winter season, who had switched from eastern Mediterranean resorts to the Canary Islands.
Anita Valien, customer relations manager at Apartamentos Los Telares, a 24-unit complex on the island of La Gomera, said she has been hosting a lot of French guests who used to vacation in North Africa.
“These are people who want the warm climate but also want to feel safe,” she said. “And we’re also seeing more and more Italians and Scandinavians.”
The Brexit effect
Spanish tourism officials and hoteliers have been concerned that the United Kingdom’s 23 June decision to leave the European Union and the subsequent fall in the pound might cause many visitors from Britain—a major inbound market for Spain and especially the islands—to stay home and refrain from traveling abroad.
In 2014, the last year for which data is available, 13 million foreigners visited the Canary Islands—Britons were well in the lead at 3.9 million visitors, followed by the Germans at 2.7 million—according to figures compiled by the Spanish Statistical Office. But many in the industry say the full impact, if any, of the Brexit vote is yet to be felt this summer season as many Britons are in the habit of booking their vacations many months in advance.
“We haven’t seen any effect yet from the Brexit vote and the resulting drop in the value of the pound against the euro,” Marichal said, adding that Brexit could have a negative impact if in the coming months British tourists feel they cannot afford to go abroad.
“But I think the British will keep on traveling and the Canary Islands are so well known in that market,” he said.
If there is a drop-off in British visitors, Marichal added, it would probably be offset by visitors from the rest of Europe—Germans, Scandinavians, French and Belgians—whose numbers are increasing. Ranera said British travelers are unlikely to cross the Canary Islands off their travel lists.
“I was talking to colleagues last week in London about this very subject,” Ranera said, “and the consensus was that the British will still continue to travel to the sun.”