Madrid Bets Big on Five-Star Hotels to Attract Luxury Travelers

25.08.2023 - 13:21 / skift.com / Star

As pandemic travel restrictions began to ease in the spring of 2021, foreign tourists returning to Madrid discovered the city’s downtown had undergone a makeover.

An area better known for its budget hostels, tacky souvenir shops and car-choked roads now had wider pavements, pedestrianized zones, and streets that Madrid’s town hall says are safer and cleaner.

The facelift was part of the city’s plan to attract a string of five-star hotels as it pushes for a piece of the luxury tourism sector until now dominated in Europe by Paris, London and Milan.

Deluxe hotels are cropping up all over the center of Spain’s capital. Four Seasons Hotels opened a property near the central Puerta del Sol after the refurbishment of seven buildings including a former bank branch. The 1,500 square meter complex includes a shopping mall for luxury brands including Dior and Hermes.

Marriott International reopened the Santo Mauro Palace after renovation work during the pandemic and in June began to revamp the Westin Palace, adding 400 rooms. The nearby Ritz has recently been upgraded to the luxury Mandarin Oriental Ritz brand. Universal Music selected Madrid for the launch of its first five-star hotel.

“We chose Madrid because it has been underrepresented in the luxury segment for years,” said Richard Brekelmans, Marriott’s vice president for Southern Europe, citing the city’s abundance of art museums, theatres and restaurants as its main draw.

Madrid hopes to avoid the saturation seen in Barcelona or the Balearic islands, while betting that the luxury sector helps it generate the same income. Barcelona, by contrast, is restricting the building or expansion of hotels in its center to address unmanageable volumes of visitors.

Madrid will have more than 2,700 luxury hotel rooms by the end of 2023, up 50 percent from a decade ago, according to a report by commercial real estate services company JLL.

The city has 33 new hotels in the pipeline, half of them in the upscale segment, compared with 13 projects in Barcelona, consultancy firm Colliers said in another report. Madrid’s hotel investment came to a record 802 million euros in 2022, three times that of Barcelona, it found.

“We saw a great potential…in the United States, Madrid was previously unknown,” said Carlos Erburu, general director of the first Thompson hotel in Europe for Hyatt Hotels Corp, which opened in Madrid in late 2022.

“The commitment the authorities in Madrid have shown for hotels versus that of Barcelona is much greater,” Erburu added.

The arrival of luxury hotels has marked a new peak in room rates.

Antonio Catalan, a partner at the Santo Mauro Palace, said the most expensive room rates there have risen from around 400 euros ($437) a night before the pandemic