To improve the sagging global economy, central banks are switching to a more accommodative monetary policy. The Federal Reserve set the tone with a 25bps cut to the base rate at the end of July and the ECB announced plans to revive the program of quantitative easing that it wound down only last year. The ECB’s potential stimulus measures would include restarting purchases of government and corporate bonds and cutting the deposit rate. Expectations for a renewed loosening policy has led to further falls in the long-term government bond yields. The yield on 10-year German bonds – considered the safest investment in Europe – fell further into negative territory, whilst yields in Spain fell to their lowest point in two decades. In such a low interest rate environment, real estate is set to benefit, and the Spanish hotel market – one of the key investment hotspots in Europe – is emerging as a potential outperformer.
Despite solid forecasts regarding the continued strength of the Spanish economy, investment activity in the hotel sector is expected to decelerate slightly compared with the record achieved last year. This is a function of investors adopting a more cautious demeanor in their capital deployment but also fewer hotel portfolios on the market. Having said that, the Spanish hotel sector continues to prove its resilience to macroeconomic and political uncertainties with tourism figures booming and all the major markets, from Marbella to Madrid and Bilbao to Barcelona seeing attractive occupancy levels and financial metrics.