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Madrid: waiting for the sun

The Spanish capital was one of the European cities hit the hardest by the crisis. With the brutal drop in OR, in 2009 its business segment entered a price war that was disastrous for results. But the months to come appear to mark a progressive return to business. The city’s tourism appeal –with the Prado Museum in the lead–holds strong. Madrid remains a short stay destination with a bright future that the leaders of the world’s hospitality industry are all trying to join.

How could the economic and political heart of a Spain in crisis resist the surrounding malaise? Madrid’s hotel market was logically affected –and hit hard at that– by the brutal slump in business. The RevPAR began to show signs of weakness from October 2008. “The first three quarters were excellent,” recalls Antonio Casado, managing director of High Tech Hoteles which has more than twenty 3* and 4* hotels in the city. The year ended on a bad note with a drop by – 6.8% in room revenue. But the descent had only just begun. The year 2009 closed with a drop in the RevPAR by – 25.9%, one of the biggest amongst the European hotel industry’s key market places. “We could hardly have hoped for worse,” regrets this hotelier. The businessmen who poured into most of the city’s hotels –national and foreign alike– became more rare.The primary two international clientele - Americans and British– were hit by the crisis full force. The occupancy rate that regularly flirted with 75% in the good years dropped below 60%. The average drop was by -7.7pts. Madrid, which had taken a certain amount of time to absorb the strong growth in its supply at the beginning of the 2000 fell behind again. With this situation, Madrid’s hotel industry entered an almost inevitable price war. The average daily rate posted a drop by 16.1%. The 4-5* segment represents nearly 60% of the city’s supply versus nearly 30% for the 3*. And properties –particularly the high capacity properties– brandished 2010 has begun on bad foundations. January marked a new drop in the RevPAR, by more than –12%. The upsets that affected all European countries kept many foreign customers on the ground.Is the first month of 2010 a harbinger of another difficult year? While we won’t talk about a real recovery, Madrid appears to be through with its hard times. Hotel results should begin to improve. “In March, our occupancy was 10 points higher than last year’s. You can sense renewed business, which also means an increase in the average daily rate. The period from March to May should be good,” foresees Antonio Casado. Traditionally, May is one of the strongest months along with September and October, and in 2010 will benefit from a combination of events. The end of Spain’s presidency of the EU should generate several important ministerial gatherings. Saturday, May 22 will be the highpoint of this favorable period: football fans all over Europe will have their eyes on the Spanish capital as supporters and media head en masse to the Santiago Bernabeu stadium for the Champions League Final.Under the instigation of Michel Platini, president of the UEFA, this final will be the first held on a weekend whereas this event is traditionally held on Wednesdays. Jorge Pérez, secretary general of the Spanish football federation, is pleased with this initiative that should have positive repercussions on tourism: “Families will be able to come this summer easily and appreciate the atmosphere that should take over Madrid.” In a city where football rules, could gathering around the black and white sphere mark a progressive return to a more acceptable level of performance?Real Madrid has become a veritable tool for promoting tourism and the famous club’s museum is one of the most visited attractions in the city; the streets fill up on weekends with national supporters as well as fans from all over Europe. Nonetheless, inversely, the national sport could have a negative impact in June. “I have one concern. The year there is the World Cup usually generates fewer trips and business meetings,” outlines the director of High Tech Hoteles.Nonetheless, aside from this punctual phenomenon, the progressive renewal of business should refresh the city’s properties. Positioned on the Corporate segment, those located around the airport, the conference hall and the Ifema, the major congress center, have particularly suffered since the beginning of the crisis. Especially since the supply was enriched by a new Hilton in 2008, then in 2009 by two hotels from the group Axor –Axor Feria and Axor Barajas –, which are all high capacity properties. This part of the city also saw the Sofitel repositioned as Pullman and new management by Rafaelhoteles of the hotel Arturo Soria five minutes away from Ifema.The timing wasn’t any more favorable for the luxurious Eurostars Madrid Tower. This 474-room 5* opened in the beginning of 2009 at the center of the business neighborhood Cuatro Torres, which occupies the first 31 floors of the SyV tower, a colossus with innovative architecture signed by Enrique Álvarez Sala and Carlos Rubio Carvajal. Symbolic of the economic dynamics –supported in great part by the real estate sector– of a country that has been catching up with the European leaders with a forced march, the year 2000 saw the launch of this major growth, which was completed in 2008. In the northern part of the city, the Cuatro Torres neighborhood was built on land belonging to Real Madrid, where it joined that of the Nuevos Minesterios with its many skyscrapers. property represents a serious challenge, but it is certain that the future will show there was a real need for such a property. The hotel counts on the quality of its installations that offer an impressive view of the city and its environs as well as the distribution strength of its parent, the group Hotusa, to guarantee a good level of business. But, above all, away from the other palaces in the city center, the hotel is waiting impatiently for the opening of the International Convention Centre of the City of Madrid (CICCM) expected in 2013. This vast ultra-modern conference center should enable Madrid to position itself as a world-class convention destination. Because while Barcelona is an established member of the Top 5 in the ICCA ranking, for the moment, Madrid only makes sporadic apparitions in the Top 20 (10th place in 2007, the year Ifema was expanded, 19th in 2006, but absent in 2008).Conversely to properties with an exclusively MICE vocation, hotels in the city center resisted the ambient moroseness. “And that, regardless of category,” remarks Antonio Casado. With four hotels in the city center, the group Room Mate took advantage of its strong concept. “We were affected by the crisis, although we felt it less. We have an anti-crisis product. With our accessible luxury concept, we compete with four and five star hotels. And we chose not to lower our rates to avoid going to war with the competition,” assures Leila Tomasi, communications manager for the group.Leisure tourism, while it was certainly impacted by the crisis, remained at appreciable levels. Madrid affirms itself from year to year as one of Europeans’ favorite short stay destinations. While the Spanish capital cannot take advantage of beach resort appeal like its Catalan rival, it does have some powerful tourist appeal, starting with its cultural Golden Triangle and trio of renowned museums –Prado, Reina Sofia and Thyssen Bornemisza– which were recently joined by the new exhibition space Caixa Forum. The night life, its animated streets and crowded tapas bars are another important source of appeal that seduces foreign clientele in increasing numbers.These are the elements that the new Radisson Blu –ideally located near the Prado and at the heart of Madrid– are banking on. (see portrait p.52). In a hotelscape where Spanish hotels are legion with a few jewels such as the Gran Melia Fenix and the very lifestyle-oriented Me by Melia, the AC Hoteles Palacio del Retiro and Santo Mauro, the Hesperia Madrid which joined the fold of NH, the Husa Princesa or the intimate hotels from the Derby Collection, international brands all gravitate – and for some time now – towards the Spanish capital. Their strong point: they have higher brand awareness among international clientele than Spanish brands.And yet, in the midst of a very full upscale supply, their presence remains relatively weak. Independent after full renovation, the Villa Magna recently abandoned management by Park Hyatt. Starwood with the Westin Palace, Orient Express, owner of the Ritz, and the InterContinental are rare representatives of a luxury hotel supply in majority dedicated to Barcelona. On the other hand, as the world leaders struggle on the upscale segment, these groups have invested the economy segment where local competition is weak except for a Sidorme project at the Barajas airport. In addition to Mercure (ex-Sofitel) in the center, Accor has expanded on the city’s outskirts with an Etap Hotel, two Formule 1 and twelve Ibis. IHG is following a similar strategy with seven Holiday Inn Express hotels and its compatriot Travelodge also has two properties in Madrid’s suburbs.The time is not one for development in all directions; once business has returned to normal, the city will no longer risk the overcapacity it suffered at the beginning of this millennium. Hoteliers have learned lessons from the past. “In light of the poor results, we stopped the opening of 3 new hotels, all ideally located and almost complete. We will reexamine the situation after June and, as soon as there are clear signs of improvement, we will launch the final process. I hope to open these hotels at the end of 2010, beginning of 2011,” explains the general manager of High Tech Hoteles. Other projects are ongoing at NH Hoteles as well as Room Mate with the future “Lucia”, the fifth family member.While waiting for a new important project on Plaza Mayor: Madrid’s town hall recently gave approval for the transformation of the Casa de la Carniceria into a hotel. The project was already in the works with the city’s candidature for the 2016 Olympics Games, which was finally awarded to its Brazilan rival, Rio de Janeiro. But the project remained with an idea to reinforcing the city’s tourist appeal, particularly on the leisure segment. Will this property brandish a world-renown banner? For the time being the needle seems to be pointing towards Paradores, the State-owned chain specializing in hotel operations in historic buildings. No matter what, this new property will, most certainly, add a new star to the city’s flag.

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