Formentor Hotel, Mallorca. | Elena Ballestero

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High demand for holidays in Mallorca and the potential growth in the luxury segment in the coming years has made the island a target for Foreign Investment Funds.

Since December last year, around 200 hotels in the Balearic Islands have been snapped up, the majority were in Mallorca and most were 4 star establishments.

The Meliá, Barceló, Riu and Iberostar chains have sold hotels to foreign investment funds, without losing management control and used the money as a cash injection for other projects.

In mid-December, Barceló sold the Formentor Hotel to the Andorran fund, Emin Capital, for 165 million euros.

"Tourism is seen as a great asset, which is why it’s attracting the funds, who see the potential in Mallorca and the other islands as a destination. Very substantial offers are being made to large, medium and small hotel chains, but now that the coronavirus pandemic is under control and tourism is recovering, hoteliers are asking for prices well above market value, which explains why operations have slowed down,” according to Hotel Investment Partners (HIP), CBRE Global Investors, Porto Bello Capital, KKR and Hispania. “They are demanding prices of 100,000-200,000 euros per room, but 80,000-125,000 euros is more realistic because that money then has to be used for rehabilitation and modernisation projects.”

Other funds operating in the Islands include, Atom Hotels, Covivio, Corum AM and Elaia Investment.