We are living in an unprecedented era in the hospitality industry in Spain.
NB: This is an article from BEONx, one of our Expert Partners
During the last few years, a unique and powerful phenomenon has occurred in this industry market: we have been witnesses of a swing similar to that of a pendulum, not only recovering from the challenging situation of the COVID-19 pandemic, but surpassing unexpected limits.
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Hotels in Spain, like their global counterparts, faced an uphill battle during the peak of the pandemic, grappling with closures, plummeting occupancy rates, and financial uncertainties. However, as the world gradually adapts to the new normal, the hospitality sector in Spain has displayed remarkable resilience and adaptability.
The industry has witnessed a shift towards digitalization, with hotels embracing innovative technologies to improve guest experiences and drive profitability. Despite the challenges, the pendulum of recovery and innovation is swinging, presenting opportunities for the hospitality industry in Spain to not only bounce back but to thrive in a post-pandemic landscape.
Surging ADR: Noteworthy Escalation in Average Daily Room Rates
Average daily rate per room values, known as ADR, experienced a greater global growth in the last 3 years than in the last two decades prior to COVID-19 pandemic, resulting in the highest hotel prices since records began (Figure 1). This growth, due to multiple factors, currently leaves us in a situation of uncertainty: Will the price continue to grow rapidly? Will there be a correction in which the price decreases? And most importantly, how do hotels ensure that their price dynamically adapts to different scenarios?
The exceptional situation provoked by COVID-19 pandemic had a worldwide relevant impact on social development and sustainability, which, in turn, was also observed for tourism. However, every social disruption has consequences on the hospitality industry, not only exceptional situations. As a representation of this mentioned impact, we could analyze hotel room prices evolution. As we can see in Figure 2, the evolution of hotel room prices since the early 2000s has gone through various stages due to national circumstances and the international context, both at a macro level and, specifically, in terms of tourism.
If we focus on the evolution of annual average growth of room prices in 2001 is approximately 4.2%. However, this picture is very variable over the following years. Spain has gone through years with decreases down to 5.9 % due to the financial crisis of 2008 and also increases of 5 and 6 % like in 2015 and 2016, respectively, which were the most significant variations in this country. From 2017 prices were growing by around 2% and evolving steadily until COVID-19 pandemic appeared.
In March 2020, everything changed: pandemic, quarantine, health emergency, travel restrictions, limits on opening hours and hotels collaborating with the health authorities from all perspectives: opening for workers, accommodating the sick. Therefore, revenue and profitability took a backseat to the bottom line during those horrible times.
