Hotel Market Beat 2023 - Spain

Investment Trends

Spain was the most active hotel investment market in Europe, with €4.2Bn transacted during 2023, a 44% increase relative to 2022. Portfolio deals
represented more than half of 2023 volume, among which are the sale of Blackstone’s 35% stakes in HIP to GIC (63 properties out of 77 in Spain) and
Portfolio Equity Inmuebles to ADIA (17 hotels). Sovereign funds and other players with less reliance on debt drove the activity.

Prime Yields

High cost of financing, economic and geopolitical uncertainty resulted in decompressing yields, especially in non-core locations. This trend is likely to
reverse in the second half of 2024, supported by expected reduction of interest rates and continued performance growth.

Market Performance

Hotel performance in Spain reached historic peaks in 2023, with a RevPAR of €105 (22% above 2019). This was driven by higher ADR, achieving €145
(+26% vs 2019), while occupancy are almost on par with 2019 levels (73% in 2023 vs 75% in 2019). This positive trend is anticipated to persist in 2024,
albeit at a more moderate pace (one digit growth anticipated year-on-year).

Supply Outlook

The arrival of foreign capital in recent years has increased the variety of hotel products and brands. Notably, there is a growing focus on the luxury sector
in Madrid, driven by international operators and brands. While the high construction cost have constrained new hotel developments, there is a growing
trend of office conversions to hotels. In Madrid, this trend is supported by the City Council.

Demand Outlook

With more than 85 million foreign tourists in 2023, Spain became the world's leading tourist destination ahead of France. The strong and consistent
demand has enabled to increase prices during 2023. These rises must be framed within the context of high inflation, nevertheless the forecast points
towards a continued upward trend in prices in 2024, showing moderation in particular segments or sub-markets.