The Hotel Formentor on Pollensa Bay was bought by the Andorran fund Emin Capital for 165 million euros. With 123 rooms, the acquisition price worked out at 1.34 million euros per room. And that was of course before the investment in redevelopment.
It was a high price, but in the view of estate agents Engel & Völkers it is indicative of what investors are willing to pay in order to enter the luxury hotel market in Mallorca and the Balearics.
Hans Lenz of Engel & Völkers, who is also president of the ABINI association of estate agencies operating at the luxury end of the property market, points out that “they all want to come”, they being major international hotel companies and investment funds that focus on the hotel sector.
Alberto Luengo, also of Engel & Völkers, says: “We are seeing a notable increase in interest among the most prestigious luxury hotel chains in the world.” An example is Four Seasons, who operate the Hotel Formentor. The Mandarin Oriental Punta Negra in Costa d’en Blanes is another.
Lenz explains that these companies are looking for large plots of land overlooking the sea well away from resort centres. The Hotel Formentor fits the bill in this regard. It has 1,200 hectares of land and is a few kilometres from Puerto Pollensa. But if they are looking to build – and the Formentor redevelopment prompted all manner of controversy – there are very few options.
In his opinion, urban planning regulations “fortunately” prevent much development. “It’s not allowed, thank God. One of the greatest attractions of the Balearics is the natural and scenic heritage. Everything possible must be done to protect this.”
But this doesn’t deter investors. “The more difficulties these large companies encounter, the more they want to establish themselves in the Balearics.” And that means paying top dollar, as was the case with the Formentor.
Lenz meanwhile believes that the Balearic Government should establish a plan for conversion of mature hotel stock – not conversion into residential accommodation but into higher quality hotels. This would help to attract “higher quality tourism” and reduce a drunken tourism, as far as possible.
When the Partido Popular were last in government (2011 to 2015), their 2012 tourism law set out incentives for quality upgrades. Some 1.4 billion euros were invested. He regrets that Francina Armengol’s left-wing government repealed this. (It did in fact initially approve an extension, as envisaged under the law, but didn’t apply a further extension after 2017.)
A new conversion plan, he feels, would represent an opportunity for the large international hotel companies which can otherwise encounter difficulties in establishing themselves in the Balearic market. This would be very positive for the economy and mean that jobs in the tourism sector would need higher qualifications, which in turn would mean higher salaries.
