Palma de Mallorca – marks a pivotal year for Simón Pedro Barceló, 59, co-president of Spain’s largest tourism group and the country’s second-largest hotel chain by number of rooms. At the end of January, he assumed full executive power of the company following the step back of his cousin, Simón Barceló Tous, as dictated by the company’s statutes for executives reaching the age of 65. This transition ends a 25-year period of dual leadership within the corporation.
The change in leadership allows Barceló a five-year window to consolidate the hotel group’s expansion plans, navigate alternatives for its travel division (Ávoris), and ensure a familial succession with the integration of two fourth-generation members into the management committee: his daughter, Marta, to lead Crestline, the US-based hotel management company currently overseeing 115 hotels, and his nephew, Antonio Tovar, son of Simón Barceló Tous, to head the Latin American division, which currently contributes 65% of the group’s profits. “That percentage used to be 80%, now it’s 65%, and we want to reduce it further in favor of markets like Spain, Italy, Morocco, Egypt, or Turkey,” Barceló stated in an interview with El País last Wednesday.
The tourism giant closed the previous fiscal year with enviable financial results: a net profit of €300 million and zero debt. “Our strong balance sheet has allowed us to weather crises firmly, but that ambition to not go all-in and not take risks has also caused us to miss opportunities because, to continue growing, we rely solely on our own resources,” Barceló noted, adding that the company’s investment profile will not change. “We want to invest €500 million annually in hotel acquisitions and renovations.” Despite headwinds including the US intervention in Venezuela and the collapse of the Cuban economy, where the group operates two hotels, the outlook for this year remains positive.
“We have a hotel in Aruba, facing the Venezuelan coast, and that latest crisis passed without impact. Our presence in Cuba is also limited. But what is happening there is concerning for the sector,” the executive said, believing a paradigm shift has occurred among tourists following the pandemic. “I was completely wrong in my initial diagnosis. I was convinced we would suffer in occupancy and with falling prices, but the opposite happened: customers prioritize experiences and travel, which has allowed us to grow in occupancy and prices, pass on rising costs, and protect our business margins.”
That idyllic tourism scenario doesn’t appear to be changing in the short term. An activity once considered beneficial has become a massive phenomenon causing rejection in some of the most visited destinations, such as Spain. Barceló defends the activity, stating his support for the growth of tourism globally and in Spain, and advocating for an increase in the weight of tourism in the Spanish economy and the arrival of international tourists. However, he stresses the need for order and infrastructure.
He cites Barcelona as an example of mismanagement. “After the 1992 Olympic Games, it exploded as an international tourist destination. From then on, the mantra was not to allow the hotel sector to grow further and to focus on residential tourism, so that everyone could benefit. The starting point was to share the benefits, because tourism was considered a good activity. But urban planning was not applied rigorously, and when they introduced tourist activity into residential areas, the problems began. The major perverse effect was among property owners dedicating residential properties to tourist rentals, removing that supply from the regular housing market and provoking the rejection of residents.” In his view, the solution is to eliminate tourist offerings from residential areas. “Families cannot coexist with tourists in the same building.”
Consolidation
With the hotel business stabilized, questions arise regarding the future plans for Ávoris, a travel division expected to reach €5 billion in revenue this year, but generating only €80 million in profit. This represents minimal profitability compared to the hotel sector, which generates eight times more profit with half the sales. “We are currently undergoing a strategic review. We clearly want to be a hotel company and are analyzing potential sales opportunities. But currently, there are no acquisition proposals,” Barceló stated, confirming the difficulties surrounding the operation. “The evolution of Ávoris’ results and the recovery of margins will make selling the company very difficult. It’s a company that lost over €300 million in 2022, and we’ve already budgeted for €80 million in EBITDA this year. A buyer will always offer based on historical results, and we will ask for a price based on future results.”
However, a Plan B exists. “The good thing about Ávoris is that, if a sale process doesn’t materialize, an IPO could be considered because it will have an attractive level of results and size to be listed. We don’t rule it out if it continues to improve in the coming years, and for that, we will continue to invest.” Regarding the hotel division, he remains open to consolidation operations like the one with Occidental in 2015. “We would love to repeat it, but we haven’t been able to find the opportunity, so we’ve focused on organic hotel-by-hotel acquisitions in markets of interest. As long as the sector continues to perform well, corporate operations will be very difficult.”
The Barceló Group, a Spanish multinational corporation, has been family-owned and controlled by the Barceló family for over 90 years, with members of the third and fourth generations currently presiding over the Group’s governing and management bodies.
