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Madrid: Looking for a second breath

A target for many hotel groups, the Spanish capital suffers from a growing over-capacity.The city is banking on the economic recovery, on a new worldwide momentum for tourism to restore a satisfactory level of hotel activity.A favourable decision for the organisation of the Olympic Games 2012 would accelerate the process and would cause a new influx of investments.

Madrid, Spain’s capital and largest city, extends over a vast plain situated 660 metres above sea level. Originally a Moorish fortress called Magerit, Madrid was captured by King Alphonse VI of Castile in the 1080s. Phillip II moved the royal court of Valladolid there in 1561. Since then its domestic importance has not stopped growing. The capital, damaged by intense battles during the Spanish Civil War, pre-empted the renaissance after the death of Francisco Franco and the restoration of democracy and its famous “movida”, marked by an intense night-life, tinged by the counter-culture.Considering the number of hotels currently under construction and the number of building permits granted until 2006, there would be no need to build hotels for the Olympics. The city’s hotel supply is already sufficient to meet the needs of the Olympic family. Like Paris, Madrid is banking on the Games to boost its dynamic. The two capitals, which have been announced as the favourites, stand shoulder to shoulder. And we mustn’t forget that London and New York are two strong competitors. We will here the results on July 6… In the meantime, the hotel supply continues to evolve. On the upscale segments - 3 to 5 stars - openings and expansions scheduled up to 2006 will bring the capacity up to 14,000 rooms. Madrid truly needs a second breath to prevent a new price war.Today, modern Madrid, with its electric vivacity, is dedicated to the cult of the art of living. Its night-life is intense and museums, art galleries and theatres elevate it to the heights of a great European capital of culture. It is a city that meets all its visitors’ needs in terms of activities, offering a multitude of possibilities for entertainment and leisure. The Spanish capital plays an important role in the popularity of world’s numbertwo tourist destination and arrivals. Six million visitors enjoy the city’s internationally prestigious museums such as the Prado, the parks in the city’s centre, historic monuments, shops, major shows and cultural events, and go there to attend a growing number of salons and congresses.Although Madrid is not as loaded with history as Rome or Paris, although it lacks the charm of Barcelona, its Spanish rival, it has nonetheless invested a great deal in growing its tourist appeal. The sports arena, destroyed by fire in 2001, has just been renovated and can host a variety of shows and athletic events. The Barajas airport is also being expanded and should be completed at the end of the year. This major construction project will allow Barajas to accommodate 70 million passengers per year, thereby doubling its current capacity.Today, Spain is one of Western Europe’s most affordable countries with a particular accommodation schema in which several types of properties rub shoulders. For a traveller with minimal requirements, 15 to 18 euros a day can suffice in Madrid. For a stay in better conditions, a budget of around 30 euros is necessary. And with 120 euros, the visitor can enjoy excellent lodging and fine dining at restaurants. In theory there are three types of hotel properties. “Pensiónes” (1 to 2 stars), with their rudimentary furnishings, cost under 20 euros for a room, with often a shared bath. “Hostales” (1 to 3 stars) are more comfortable and generally equipped with private baths, the price of a double can go up to 40 euros. For a hotel (1 to 5 stars), prices can run from 25 to 350 euros. Located in old castles, convents or characteristic residences, “paradores”, which are State managed, belong to a special category. Here a double costs at least 84 euros. Luxurious palaces and castles cohabit with modern properties, thereby constituting an excellent offer in terms of equipment for celebrating events, reunions and receptions of all kinds. All these elements combine to make Madrid a prized international destination for congresses and corporate conventions. The city has two convention centres and two exhibition parks that attract over five million professionals each year. The number of fairs and salons in Madrid continues to grow (nearly 4,000 in 2004). The economic benefits for the city are estimated at over 588 million euros for the year 2003. The importance of these events is so great that the exhibition centre Ifema undergo its second enlargement with the construction of two new pavilions for an investment of 115 million euros. A new municipal exhibition and congress centre with 5,000 places is also being built and will be completed in 2009 to accommodate the growing influx of business tourists. The hotel supply accommodates 65% business clientele. But the city also targets leisure clientele and cultural tourism. It implemented the Madrid Card for which the new campaign will be revealed this spring. This card provides entry to 43 of the main museums, unlimited use of the tourist bus, the possibility of participating in all the tours in the “Discover Madrid” programme, as well as discounts at some stores … Some museums such as the Reina Sofia Art Centre have been completely renovated. Also, several initiatives such as “Madrid by Bicycle” or special tours for people with disabilities are already a great success. With its new equipment, the Spanish capital hopes, like Paris, to win the opportunity to host the 2012 Olympics. This would be fortunate for the Spanish capital as it suffers from a growing over-capacity in its hotels.Today, Madrid has more than 27,000 hotel rooms at 192 properties more than half of which are in 3-, 4- and 5-star hotels. And this figure does not include “pensiones”, “hostales” and “paradores”, which account for nearly 8,000 additional rooms. The capital sold over 11 million nights in 2004 meaning an 8.6% increase over 2003 and the number of tourists also rose by over 11%, but this is not enough to increase the occupancy rate. “Madrid went from just a few rooms to too many. And although the number of clients is growing, average daily rates are dropping and the RevPAR is suffering,” explains Francisco Benito, a manager at the hotel chain Husa.The terrorist attacks of March 11, 2003 have also left their scars. The year 2004 did not follow the same growth rate as the previous years. “Urban tourism has suffered from excess supply and these attacks,” explains Jaime Puig de la Bellacasa, vice-president of Sol Melia. Americans, the English and Germans, in particular, were fewer. Just like all the countries in Southern Europe, the Spanish capital has also suffered from the loss of tourists who stayed in their home countries or travelled to Eastern Europe and the Adriatic. Result: the summer season was not as good as other years. And yet, despite the over-capacity that has been observed, new hotels have been opening one after another. Among the recent openings, may be noted two 5-star hotels: the hotel Urban (Derby Hoteles) and the hotel Palacio del Retiro (AC Hoteles). And the world’s largest hotel groups that have not yet entered Madrid’s market place have their sites set on the city. “Because of this over-capacity we cannot be in Madrid or Lisbon. But even if the market is strained, we have to be in Madrid,” explains Jean-Charles Donnat, Development manager at Rezidor SAS Hospitality. Hilton International makes the same considerations: “We need to be better established in Spain,” admitted Raymond Chigot, vice-president in charge of Development EMEA. Until 2006, the construction of 39 hotels is planned, meaning nearly 10,000 new beds. Spanish groups Sol Melia and NH in particular continue their expansion and demonstrate the dynamism of the Iberian hotel industry, despite the slump in tourism and drops in the RevPAR recorded throughout the year. This is also an opportunity to launch new projects, such as the first European Hard Rock Hotel, a transformation of the Tryp Reina Victoria Hotel, at the heart of the old town. Current legislation has become more flexible to facilitate the opening of new hotels in the capital like for the building of the hotel Puerta America funded by the Spanish hotel chain Silken Group, in which hoards of mediatised architects are collaborating: Lord Foster, Ron Arad, Jean Nouvel, etc…. Each of 12 floors in the future property have been distributed among 23 contributors in all, from 13 countries. The building will have 360 rooms for a surface area of 34,000 sq.m. Each floor thus has its own personality and the hotel will be resolutely anti-conformist. The inauguration by King Juan Carlos is scheduled for May.Considering the number of hotels currently under construction and the number of building permits granted until 2006, there would be no need to build hotels for the Olympics. The city’s hotel supply is already sufficient to meet the needs of the Olympic family. Like Paris, Madrid is banking on the Games to boost its dynamic. The two capitals, which have been announced as the favourites, stand shoulder to shoulder. And we mustn’t forget that London and New York are two strong competitors. We will here the results on July 6… In the meantime, the hotel supply continues to evolve. On the upscale segments - 3 to 5 stars - openings and expansions scheduled up to 2006 will bring the capacity up to 14,000 rooms. Madrid truly needs a second breath to prevent a new price war.

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