Lorraine Williamson
In just under twenty years, Spain’s hotel industry has been dramatically reshaped. Once dominated by mid-range three-star establishments, the market is now defined by the rise of luxury hotels in Spain.
By 2024, four- and five-star properties together accounted for more than half of the country’s 1.92 million hotel beds. The four-star category has grown to nearly half of all supply, while five-star capacity has doubled since 2007.
From crisis to opportunity
The global financial crash of 2008 proved to be a turning point. With visitor numbers under pressure, hoteliers shifted from chasing volume to focusing on quality and experience. That gamble has paid off. According to Spain’s National Statistics Institute (INE), hotels recorded a record 363.6 million overnight stays in 2024—almost 5% more than the previous year.
Rising prices, bigger returns
Luxury has brought higher costs for guests but far larger profits for owners. The average price of a five-star room has climbed from €145 in 2007 to €275 in 2024. Revenue per available room has tripled to €190, reflecting strong demand at the top end of the market. Analysts such as Jorge Ruiz of CBRE say the sector’s ability to pivot towards “quality and experience” explains its ongoing strength.
Billions flow into luxury hotels
International investors have been quick to act. Madrid’s Ritz and Palace hotels alone absorbed nearly €200 million in refurbishments. Blackstone, via its Hotel Investment Partners (HIP) arm, is pushing ahead with an €800 million upgrade programme across Spain and Southern Europe. Spanish groups are equally ambitious: Barceló poured €500 million into new projects in 2025, while Meliá saw a 72% profit rise in the first half of the year and has over 30 openings planned by 2026.
Leisure travel proves more resilient
The luxury surge is closely linked to broader tourism trends. During downturns, business travel is often the first to be cut, as seen during the recession and again in the pandemic. Leisure travel, however, has proved far sturdier, with holidaymakers continuing to spend on getaways even if budgets shift. For investors, that makes the leisure-driven luxury segment far more attractive than corporate-oriented three-star hotels.
Budget hotels also booming
Not all the action is at the top end. Budget hotels in Spain attracted 17% of all sector investment in early 2025—quadruple the level of a year earlier. Alongside this, demand for alternatives such as holiday rentals, campsites, and rural homes is climbing, growing nearly 4% in July alone. The market is effectively polarising: at one end, high-margin luxury; at the other, low-cost stays to meet demand from travellers priced out of the middle.
The challenge of overtourism
Spain’s success comes with growing tensions. Nearly 94 million visitors spent a record €126 billion in 2024, but major cities and islands are feeling the strain. Protests in Barcelona, Málaga, the Balearics, and the Canaries highlight rising rents, noise, and pressure on local services. For many residents, tourism’s benefits are being outweighed by its impact on daily life. Authorities are now searching for a model that values fewer visitors but greater economic return—a balance in which luxury hotels fit naturally.
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A market redefining tourism
Spain’s shift towards high-end accommodation reflects a sector in transition. Luxury hotels now embody the industry’s move away from quantity towards value, experience, and resilience. Whether this path can also deliver on sustainability remains uncertain. But one fact is clear: Spain’s future as a tourism powerhouse will be shaped less by the number of visitors and more by how much each is willing to spend.
Source: El País