Spanish Gold: How High Demand is Pushing RevPAR

Based in Spain, Palladium Hotel Group has been operating for more than 50 years, with a portfolio that spans Europe, Brazil and the Caribbean.

The company manages 50 hotels worldwide under five brands: Palladium Hotels & Resorts, Fiesta Hotels & Resorts, Ushuaïa Unexpected Hotels, Only You and Ayre Hotels. It also operates the Hard Rock Hotels brand under license in Spain.

In Ibiza, where Palladium has the most of its vacation properties, RevPAR numbers have seen double-digit growth for the past five years.

We caught up with Diego Fernández Pérez De Ponga, Corporate Revenue Manager at Palladium Hotel Group, responsible for Palladium Hotels & Resorts, Fiesta Hotels & Resorts, Ushuaïa Unexpected Hotels and Hard Rock Hotels, to find out more about RevPAR growth in Spain, the group’s expansion plans in Iberia, and the importance of a distribution strategy that is open to all channels.

Hotels in Spain and Portugal enjoyed strong revenue growth in 2017. Why do you think this was such a strong year and do you see these business levels continuing in 2018?

The first thing we have to take into account is that we have had external factors that have modified the buying patterns of tourists because, as everyone knows, geopolitical situations have made Spain and Portugal two of the safest destinations in the world and also (with some exceptions) at a good price, which has made us have a lot of demand in recent years and this is "gold" for a revenue manage ... If we have strong demand we have good RevPAR.

The season of 2018 will surely have fewer customers than the previous ones since destinations like Egypt and especially Turkey are back in the minds of consumers so we return to a very competitive environment that has not been seen since 2014-2015.

Spain has long been popular destination with British travellers. How is the UK’s exit from the EU likely to impact this?

I think that the British customer will continue to travel, but due to the depreciation of the pound, holidays will be shorter and destinations will change, although I see them still travelling within Spain and Portugal. I also believe that the sales of All Inclusive packages will be increased, helping families to maintain their total holiday budget.

I believe that Spain and Portugal will not be affected much as they are still the safest destinations in southern Europe.

Companies like Ryanair are already considering their future after Brexit and I am sure that if the negotiations between the EU and UK governments do not reach a good port, the single airspace will be endangered and with it many of the connections that connect the United Kingdom with Spain and Portugal. In my humble opinion that could become a complete disaster.

Spain is a popular summer holiday destination. What are the challenges of managing seasonal variances in demand?

The main challenge we have when we operate short seasons is there is little margin for error: a month with bad results can cost you all the benefits obtained for the rest of the season, so the teams work with quite a lot of pressure throughout the year.
Trying to have good opening and closing days is a challenge also, since it takes 2-3 weeks for a hotel to get into high occupancy levels and get good numbers without "throwing" the fare. In order to expand these seasons and be able to gain days of operation we must give more importance to the MICE market to help us capture business in the lower seasons.

From a revenue management perspective, the most difficult thing is to be able to measure well the number of rooms that can be sold in pre-sales and with offers, since many times you have to play them so that in the last hour enough demand arrives to increase the prices to reach the income that they demand.

Spanish hotels have historically depended on fixed rate contracts with tour operators to bring volume to their properties. As traveller booking behaviours change, what new channels are you exploring to break this dependence?

Since the 1970s, the Spanish hotel industry has depended on the large TTOO agreements since they were the ones that could bring enough customers to keep the operation successful. However, this has changed in recent years with the push of the online market. Hoteliers have changed their distribution strategies and have given the online market more share. This market, thanks to its dynamic rates, has enabled hoteliers to increase the RevPAR of their establishments to double digits in recent years.

I think the key to everything is to have a healthy distribution strategy in which you do not depend on anyone in particular. We are working with all possible channels and we attach great importance to the online channel, but without forgetting the importance of the offline channel including travel agencies, large TTOO and of course, the big selling prescribers such as travel agents.

What new destinations in Spain and Portugal will you expand into in the future?

We are exploring several opportunities both in Spain and in Portugal, including Mallorca, the Costa del Sol and Algarve. These destinations perfectly match our vision of hotel and product offer.

What new inbound markets show potential for 2018 and beyond?

I think the Asian market has incredible potential. A lot of companies have been developing this years and this year they are seeing their fruits, although there is still a lot of work to do in terms of getting more air connections or in visa policies. The Russian market is also growing again.

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