The impact of the pandemic
Business 10/02/2021

Covid hauls Mandarin and Juan Carlos I hotels to the market

Operations are taking place in Spain as it is difficult to cope with closed establishments.

3 min
The entrance of the iconic Mandarin Oriental on Passeig de Gràcia, in an image from last week.

BarcelonaPasseig de Gràcia, 38-40, in the middle of the most luxurious street of Barcelona. Few things explain the iconic strength of the Mandarin Oriental Hotel in the Catalan capital as well as its address. Hence the symbolic impact on the real estate and tourism sector of the news that the five-star establishment, owned by the Andorran group Reig Capital, is experiencing difficulties. Several sources consulted by ARA suggest that the establishment is for sale. It has a market price of about 220 million, but in the current context would be sold for 180.

Reig Capital, family office of the Reig family, does not confirm this news. "The hotel is not for sale", the first executive of the company, Gilles Dregi, says. But market intermediaries and investors consulted maintain that the Mandarin Hotel is for sale. Sources close to the hotel state that "all hotels in Barcelona are for sale".

A recent Exceltur report explains it: the number of foreign tourists who go to four and five star hotels has fallen more than 80% in the last year in Spain, and Barcelona leads the fall in hotel turnover with a drop of 86%. In the Mandarin, according to hotel sources, 85% of visitors were foreigners.

Neither the establishment nor the premises that depend on it, among which stands the restaurant Blanc by Carme Ruscalleda, have been able to reopen their doors since the hotel was forced to close in March last year. It was a hotel that employed around 200 workers and, therefore, it has a significant cost burden. Right now most of its staff are on furlough scheme and waiting for international tourism to return, but this scenario still seems distant and voices from the hotel do not hide their pessimism in the short term: "Opening a place like this is more difficult than opening a hotel of 15 people".

From CaixaBank to Farallon

Industry sources suggest that the Mandarin was no longer in good shape when covid broke out. The establishment did not make operating profits until 2015, after opening in 2009. In the last existing results in the Mercantile Registry, in 2017, Reig's company (which manages the hotel) earned one million euros.

In the last four years, the Mandarin Hotel has had three directors: in 2017, Jorge Monje replaced Greg Liddell, and this 2020 Jean Philippe Moser took over the position. This change responded to a novelty in the financial situation of Reig Capital: the family office maintained a debt of close to 450 million euros with CaixaBank, but with the outbreak of the pandemic the financial institution transferred the liabilities to the Californian fund Farallon for about 200 million, according to industry sources. It is this change that explains the arrival of Moser. Different voices explain that there is a clash between Farallon and Reig, because the former want the sale and the latter are resisting to it.

A sector in crisis

Another establishment that may change hands is the Juan Carlos I, owned by Barcelona Project's and operated by the Canadian Fairmont. Sources in the sector assure that the emblematic establishment is for sale for a symbolic price, in exchange for the buyer to keep a debt of around 80 million. The hotel is still closed, and Accor does not confirm that it is on the market.

The situation of the Mandarin and the Juan Carlos I is a reflection of what is happening in the sector, and how it affects other establishments. At the end of August, the general director of the Barcelona Hotel Guild, Manel Casals, told ARA that many establishments could change hands, because there were investors looking for opportunities: "They knock on our door to ask if there are hotels available".

The latest data from the Hotel Guild indicate that, after the restrictions of the second wave, only 107 establishments are open: three out of four are closed. Those that are open have an occupancy rate of between 10% and 15%. Some have not been able to hold out any longer. This is the case of the Hotel Nobu -the former Torre Catalunya-, which before Christmas was sold to the fund manager ASG for a price of about 80 million. The hotel belonged to the Selenta group, owned by the president of the Hotel Guild, Jordi Mestre.

However, this is a general phenomenon. In December, Barceló sold the Hotel Formentor in Mallorca for 165 million, and yesterday it transcended that Archer Hotel Capital has closed the purchase of the Hotel Madrid Edition for 205 million euros.

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