One of the submarkets experiencing a strong upward shift in average daily rate is the central district of Madrid, the area around Madrid’s Puerta del Sol, Gran Vía Street and Alcalá Street.
Since the arrival of Four Seasons to Madrid in late 2020, a new wave of luxury hotel redevelopment is transforming the Spanish capital’s center, with its beautiful, historic buildings paving the way for a new breed of luxury and upscale hotel property.
The ADR tide is rising so much in this area that it is even benefiting other high-end properties farther away from Puerta del Sol, such as in the Barrio de Salamanca area.
In Puerta del Sol, several new global luxury brands are expected to add value to the refurbishment of former office buildings.
Iconic brands such as JW Marriott, Nobu and French high-end brand Evok have projects earmarked. Moreover, other luxury brands are expected to be officially announced shortly in projects such as the Pescaderías Coruñesas next to the JW Marriott and in the Metropolis building at the intersection of Alcalá and Gran Vía streets.
Metropolis, a project in which Spanish restaurant company Grupo Paraguas and Turkish group Dogus have stakes, will bring a small, luxury hotel, several restaurants and wellness center, among other leisure offerings.
Close by is number 44, Alcalá St., a building owned by Zurich Insurance that is expected also to put an end to its office use and become a luxury hotel.
As a result of this hotel hyperactivity around this area — known officially as “Kilometer Zero” for the entire Spanish road network — PHG expects Madrid’s revenue per available room to rise above pre-pandemic levels and overtake historically urban rivals such as Barcelona and San Sebastián.
This RevPAR evolution should reach cruising speed starting in 2024 and 2025, when many of these redevelopment projects will start to come to market.
Alongside this redevelopment enthusiasm, there are three interesting trends clearly shaping the area simultaneously.
The first is that most of these projects will introduce international global brands to the market.
As ADR levels push higher in Madrid’s most-popular neighborhood, in most instances the only way for hotel investors and owners to capitalize on new projects is to also adopt an international brand that can keep up with maximizing revenue generation and can attract affluent guests from markets such as the U.S., Asia, Latin America and Northern Europe.
Global brands are ideally positioned to tap into the power of this wave.
Secondly, the market positioning of these redevelopment projects is taking place mostly in the upscale or luxury segments.
The presence of hotels from Edition and Four Seasons, both already in operation, present a fantastic platform for our luxury brands and hotels to jump on.
The confirmation that Nobu and JW Marriott are planning to land in the central district only makes the case for the next luxury development coming along even more compelling.
Added to this, the architectural beauty and appeal of the historic buildings in this part of town make the luxury proposition a no-brainer for both architects and interior designers.
After this first wave of luxury newcomers, a second redevelopment wave will come, bringing product that could be termed “affordable luxury,” but which will retain a similar focus on interior design.
Lastly, one of the few positive collateral effects from which the center of Madrid has been able to benefit during the pandemic has been the tremendous rise in restaurants and cocktail bars in the city.
During the pandemic, local politicians had been adamant in allowing restaurant groups to expand their seating space by taking over exterior public space and, in many instances, parking areas.
As a result of this business-oriented strategy, the food-and-beverage sector thrived, aided by widescale adoption of food-and-beverage online booking systems.
The hotel sector followed this market shift, with Four Seasons introducing famous chef Dani García and Marriott’s Edition welcoming Peruvian chef Diego Muñoz and Mexican chef Enrique Olvera to its two main property restaurants.
Nobu, which started in food and beverage, will bring its mentor Nobu Matsuhisa to Madrid.
In Madrid, both the hotel and food-and-beverage stakes are getting higher and higher.
Ivar Yuste is the leader of the hospitality consulting team at PHG Hotels & Resorts.
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