Hotel 101 in Valdebebas, one of the rapidly growing areas of Madrid, will open its doors next year. The building is almost finished and although it does not yet receive guests, it has sold almost all of its rooms. Of a total of 680, only 38 remain unpurchased. The others have been acquired for a price of around 200,000 euros each. The buyers are owners of the room, but they can only use it five days a year, the rest of the time the hotel management is responsible for the accommodation of visitors who want to stay there, in addition to the daily maintenance of the facilities and the services it offers, including the swimming pool. This business model, which is now landing in Spain and is known as a condo-hotel, combines real estate ownership with hotel management: investors purchase a room and transfer it to a company for its exploitation. The entity assumes management, while the buyer receives a percentage of the income generated. «Those interested can get this stay as an independent unit with registered ownership title, producing monthly passive profits without worrying about operational management. That is the main attraction. You don’t have to do anything, just wait to receive the money,» says Alvise da Mosto, associate director of the luxury real estate company BARNES Spain, which acts as an intermediary between the hotel and investors. But this business strategy hides an underlying issue: social inequality, which is accentuating at high speed. This is explained by Jaime Palomera, doctor in Economic Anthropology, author of the book The Sequestration of Housing (Peninsula) and co-founder of the Urban Research Institute. «There is an increasingly smaller group of the Spanish population, between 1% and 5%, that accumulates a lot of savings because they have assets, an asset that gives them more and more passive income without having to work and reinvests it, they do not have it in the bank. It is a vicious circle. It starts with tourist apartments and continues with hotel rooms, but it does not represent the middle class,» he argues after alluding to an increasingly less equitable redistribution of wealth. Da Mosto confirms that the most common investor profile in this project is the one who already bought one or two apartments a year in the city center or in the Salamanca neighborhood in their real estate agency to rent them out. “This year they have preferred to bet on 10 or 15 rooms at Hotel 101. They are usually people who are dedicated to investing in the housing market,” he comments after estimating that future guests will pay between 120 and 150 euros per night. “Inequality is generated, above all, through the distribution of wealth and income, not through work,” insists Palomera. He does not consider that this business model now encourages speculation or puts pressure on the current housing market because it is a hotel, but he remains cautious. “If this strategy becomes normalized, it will be necessary to study its relationship with the price dynamics of the surrounding areas,” he warns. The initial idea of this project, for which a 6,593 square meter plot of land was acquired, did not contemplate prioritizing the national buyer. They promoted the so-called golden visa, the residence visa for foreign investors, through the purchase of rooms. “Sun, naps, tapas and sangria: Join the party every day in Madrid, Spain!”, they announced. One option to obtain the visa was to acquire properties for a minimum value of half a million euros, until the Government approved its repeal at the beginning of this year to alleviate the pressure on the real estate market. So, the strategy was modified. “We always work with national investors, although many Filipinos had previously purchased rooms, but with the modification of the regulations everything changed,” comments da Mosto after clarifying that there are several real estate agencies that act as intermediaries between Hotel 101 and the buyers. His company has sold 50 rooms to different individuals, some in packages of 10 and even 15 rooms. Recognize that there were ups and downs during the marketing process. At first, they sold very well, but from January to summer there was a significant drop due to the interruption of the golden visas. “It took a few months to readjust the plan,” he clarifies.
Economic return
Monthly profits are divided among all investors. They receive an equal share of the gross room revenue generated by the entire hotel regardless of the occupancy of their individual unit. It is another of the incentives of this real estate hook, which also offers another five nights in the company’s international accommodation. All rooms are the same with a functional and standardized model, which optimizes operational efficiency. Da Mosto compares them to a puzzle. «There are panels on the walls, so if one breaks, gets stained or is painted, it is removed and a new one is put in. There is a brutal reduction in costs due to economies of scale,» he points out. Buyers are estimated a monthly return of more than 7% on the capital invested, but there are no guarantees. The hotel will have three stars to require less staff and be more profitable, although it will have four-star amenities by having a 24-hour restaurant, outdoor pool, bar, gym, meeting rooms, business center, reception and day and night security, laundry, left-luggage office and store, according to the associate director of the luxury real estate company. The project belongs to the entity Hotel101 Global Pte. Ltd., registered in Singapore. It is the global hotel expansion arm of Double Dragon Corporation, a real estate company based in the Philippines, where it has been betting on the sale of rooms for years, as in Japan. The company has 12 buildings dedicated to this business model, but in Europe the one in Madrid is the first. “In the past, a hotel could resort to selling its rooms because it needed money at a specific moment, but they bet on this from the beginning and make a profit,” da Mosto emphasizes. The building is located on Armed Forces Avenue, a few minutes from the airport. It is also close to the IFEMA convention center and the Real Madrid Sports City. “In addition, it will be in front of the future Formula 1 circuit, which will increase its tourist attraction,” says an advertisement on the Idealista platform, where the rooms are promoted. The building has already been designated as an official partner of the competition’s future prize. WSP Spain has been hired to design the basic project and all subsequent development of the first Double Dragon hotel in Europe, marking the beginning of an international expansion plan with the aim of reaching half a million beds in more than 100 countries.
