As we navigate through 2025, the macro-economic landscape remains challenging despite Spain’s relatively strong economic performance compared to neighbouring countries. While the battle against inflation appears to be behind us, governments are now focusing on reducing their deficits. This will likely result in reduced public spending and/or the introduction of new income sources, which could pressure consumer spending power and limit hoteliers’ ability to further increase prices.

On a positive note, energy costs have returned to reasonable levels. The recent energy crisis has compelled hoteliers to adopt more efficient practices, which will help maintain strong bottom line conversions. These factors, combined with an increased appetite for the hotel sector from institutional funds and REITs, should sustain transactional activity in 2025, although it remains to be seen if secondary destinations will benefit from this situation.

Spain has firmly established itself as a world leader in tourism, attracting an increasing number of international tourists to both urban and resort destinations. Political instability in Europe and the Middle East has contributed to this. Interestingly, we have noticed a softening of seasonality in resort destinations oriented toward international tourists, which warrants further monitoring.

Domestic customers remain significant, accounting for about a third of the total overnights in the country, but this segment is not expected to grow next year.

Spanish banks remain very active and keen on financing the hospitality sector with the appropriate sponsors. Following recent rate decreases, financing conditions are improving, although loan-to-value ratios have not returned to pre-2022 levels. Alternative financing is still a developing area, with more players trying to enter this sector.

The Spanish hotel sector is a global leader in sustainability, driven by both legislative mandates and customer expectations. Owners, operators, and investors continue to invest in and develop best practices in this field. However, recent protests in tourist destinations regarding ‘over-tourism’ suggest that some cities may further regulate to limit new supply and address the issue of tourist apartments. Madrid and Barcelona are already developing new policies to be implemented in the coming years.

Additionally, there are staffing issues in the islands, primarily due to a lack of housing options for staff. Some hotel owners are developing staff housing to address this issue.