Madrid Market Spotlight - FY 25

OVERVIEW

The hotel market In Madrid recorded an improvement in performance in 2025, with GOP PAR rising by +12.8% to €100.8, driven by a €23.1 PAR increase in total revenue. Total operating expenses partially offset this gain, increasing by €11.7 PAR.

The Rooms department led the GOP growth, with RevPAR rising by €18.3 (+11.2%), driven by an increase in ADR to €243.0 (+8.6%) and a moderate improvement in occupancy to 74.9% (+2.5%). F&B revenue also grew, increasing 7.3% year‑on‑year to reach €50.4 PAR.

On the expenses side, total costs increased by 9.1%, driven primarily by Payroll (+9.0%), with Rooms and F&B remaining the main contributors to payroll growth, and by a further rise in Other Expenses (+11.0%) as wage pressures continued.

In terms of seasonality, occupancy generally increased throughout the year, with only two months underperforming compared to last year, June (-3.1%) and July (-0.1%). January posted the strongest growth (+7.5%), while October recorded the highest occupancy (87.7%) and August the lowest (62.9%).

Public records indicate that 16 new hotels commenced operations during 2025, being partially offset by one closure. These additions contributed a total of 1,067 new rooms, however, after adjusting for opening dates, the effective net increase amounted to 601 rooms per day. On a weighted basis, this reflects a +1.0% growth in market supply.

Driven by a strong increase in GOP PAR (+12.8%), the GOP margin grew to 41.9% (+2.0%). Revenue outpaced cost growth driving a stronger bottom‑line performance. Hence, a solid GOP Flow Through of 49.6% is achieved, indicating that nearly half of the additional revenue converted into profit.

SUPPLY

Based on public announcements, 16 new hotels openings occurred during 2025, only offset by the closure of ME Reina Victoria (192 rooms) which is expected to reopen after full renovation. A total of 1,067 rooms were added during 2025, translating into 601 net effective rooms per day once adjusted for opening dates and resulting in a +1.0% increase in market supply on a weighted basis.

Hotel openings are increasingly shifting toward peripheral areas such as San Blas, which accounts for most of the new additions (8 hotels and 817 rooms), reflecting a move toward more price‑sensitive leisure demand. The majority of the new supply falls within the Midscale (53.7%) and Economy (24.5%) segments. Additionally, six of the new openings were extended‑stay properties (126 Rooms).

Looking ahead to 2026, 14 hotels are currently under construction and scheduled to open in the first half of the year, adding roughly 1,600 rooms to the market. This includes landmark properties such as the Mercer Madrid (61 rooms), the Nômade Temple (109 rooms) and the Club Metropolis (19 rooms).

COSTS

PAYROLL COSTS

Labour expenses in hotels in Madrid slightly decreased as a percentage of revenue in 2025, moving from 29.1% to 28.7% (‑0.4 p.p., ‑1.5%), despite rising in nominal terms. The largest cost increases occurred in the Rooms (+€2.8 PAR, +11.5%) and F&B (+€1.5 PAR, +6.1%) departments. The Spanish minimum wages grew (+4.4%) in 2025 partially explains the continued upward pressure on payroll costs in nominal terms.

COST OF SALES

Cost of Sales decreased moderately as a percentage of revenue, from 10.0% to 9.6% (-0.4 p.p., -3.8%), despite rising in nominal terms. The main drives of this increase were F&B (+€0.8 PAR, +8.4%) and OOD (+€0.7 PAR, +33.0%).

UTILITY COSTS

Utilities increased to €4.7 PAR (+€0.3, +7.3%) while remaining flat at 2.0% of revenue. The rise was driven by Electricity (+€0.2 PAR, +9.0%), but overall the increase in utilities continues to be marginal at PAR level.

OTHER EXPENSES (excl. Utilities)

Other Expenses remained flat YoY at 17.8% of revenue, supported by revenue growth that offset higher absolute costs. In nominal terms, costs rose to €42.9 PAR (+€4.3, +11.0%), driven mainly by S&M (+€1.8 PAR, +18.6%), A&G (+€1.7 PAR, +23.0%) and Rooms (+€0.4 PAR, +4.2%).

DEPARTMENTAL REVENUES AND EXPENSES

The total revenue increase was driven by Rooms (+€18.3 PAR, +11.2%) and F&B (+€3.4 PAR, +7.3%). Overall, all departments recorded revenue growth.

The total expense increase was led by Rooms (+€3.7 PAR, +7.9%),  F&B (+€2.8 PAR, +7.7%) and S&M (+€2.2 PAR, +15.7%).