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Barcelona: two years since the Catalonia independence referendum

Barcelona entered a period of instability in late 2017 as August’s terror attack on the famous street of Las Ramblas was followed by October protests that stemmed from the Catalonia independence referendum. As a popular tourist destination, these situations understandably affected hotel performance, and as the two-year anniversary approaches, we took a look at the impact on Barcelona and its subsequent recovery.

Put bluntly, the impact resulted in immediate decline. In fact, Barcelona reported year-over-year decreases in revenue per available room (RevPAR) in 11 of the following 12 months. The final quarter of 2017 was hit the hardest with December producing a significant 27.0% drop. However, that late-year decline failed to halt Barcelona’s run of yearly RevPAR growth that ran from 2010 to 2017 as overall performance for the year still produced a 5.4% uplift in the metric. 

Seven months of decline between January and August 2018 did however bring the streak to an end as yearly RevPAR fell 5.1% in 2018. The market’s profitability levels were also affected, as gross operating profit per available room (GOPPAR) fell 7.4% for the year. 

Although the impact of the August 2017 terror incident wasn’t immediately felt—RevPAR growth was reported in September and August—it is likely to have played a part in overall visitor confidence when the protests began. 

The impact on hotel classes and market demand

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The effect of the Catalonia independence referendum on Barcelona hotel classes

This period of uncertainty significantly affected Luxury and Upper Upscale hotels, the two classes that typically suffer from instability in Barcelona and the subsequent impact on leisure demand. Combined together, Luxury and Upper Upscale RevPAR fell 16.2% in the 12 months between October 2017 and September 2018.

On the other hand, Midscale and Economy properties are less susceptible during times of instability, especially because they offer suitable accommodation for any media or authorities that visit the city in response to situations like those previously mentioned. From October’s referendum and protests to September 2018, Midscale & Economy collapsed class RevPAR fell just 4.3%.

Those declines were due to year-over-year demand decreases in 10 consecutive months beginning with August 2017. Reduced visitor confidence is likely to have displaced demand to other European cities. 

Market resilience and a return to growth
 

Barcelona is a resilient city. That was demonstrated by a relatively rapid recovery from these two serious situations. The market entered a period of year-over-year RevPAR growth with consecutive monthly uplifts between October 2018 and July 2019. Returning visitor confidence was demonstrated by nine consecutive months of occupancy growth in the same period that ended with a marginal 0.2% drop in July 2019. Performance data for the opening seven months of the year reveals that RevPAR increased 11.8% to an absolute level of EUR116.89.

What lies ahead for Barcelona?
 

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Analysis of Barcelona hotel performance and projected growth from 2014 to 2023

Given its 2019 recovery to date, STR forecasts 10% RevPAR growth for the full year. This is projected to level out in 2020 before yearly increases through 2023. 

The moratorium on new hotels is a key driver of performance increases, as muted supply growth will be outpaced by demand. “Overtourism” led to limits being introduced in 2015, and although the market recently welcomed its first new opening since this introduction, belief that this will lead to an influx of properties is misplaced. The moratorium has been recently discussed by city officials, but there hasn’t been an indication that the ban on new openings will be lifted. Instead, it seems there has been consideration to ease the limits on property refurbishment. 

There are projects in Barcelona’s pipeline that were agreed upon pre-moratorium and will enter the marketplace in the coming years. The 1,200 rooms currently in construction are projected to enter the market by 2021, while the 2,273 total rooms in Barcelona’s active pipeline are also set to come online by the end of 2022.
 

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Hotel openings Barcelona 2019-24
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Hotel inventory growth in Barcelona, September 2019-24

An area that could potentially impact Barcelona hotel demand in the future is a recent surge in street crime. The number of violent street robberies has risen 30% on 2018 levels and had already reached 5,331 as of August, amid calls for tougher punishment (Source: The Guardian). This has largely gone under the radar, but has affected domestic demand. If this trend continues and garners greater attention, it could impact visitor confidence on a wider scale due to poor perception around safety.