Spain's tourism sector closed 2023 with record figures: more than 85 million international tourists, surpassing pre-pandemic records and consolidating Spain as the world's second most visited destination. However, the full recovery comes accompanied by new structural challenges requiring long-term strategic responses — from regulatory pressure on tourist rentals to mandatory sustainability reporting obligations and a more complex tax landscape.
Overcrowding and Tourism Backlash
Major tourist cities — Barcelona, Madrid, Seville, Malaga — and the archipelagos experienced saturation levels that generated social tensions. Anti-mass tourism movements prompted debates on regulating tourist use properties (VUTs) and limits on opening new hotel establishments in certain areas.
Barcelona was the first city to announce non-renewal of tourist apartment licences on expiry in 2028, effectively removing more than 10,000 units from the market. Madrid, Palma de Mallorca and San Sebastian also tightened their tourist use plans, restricting the zones where a VUT can legally operate. This zoning-based restriction model, supported by Article 5 of the Urban Lettings Act (LAU) and the general urban planning frameworks of each municipality, is gaining ground over the moratorium and quota systems that some councils previously applied.
For operators with tourist apartment portfolios, strategy must follow two parallel tracks: a legal review of the current status of each licence and its location relative to potentially restricted zones, and diversification toward hotel assets or coliving that are not subject to the same quota regime. Due diligence on any tourist asset acquisition in urban land must, from 2023 onwards, include a specific analysis of municipal planning rules and the licence’s exposure to restriction scenarios.
Hotel Investment and Opportunities
Despite the challenges, Spain’s hotel sector attracted record investment volumes in 2023. Luxury and upper upscale assets recorded the highest occupancy rates and RevPAR in history. Spanish hotel chains continued their international expansion and strengthened their portfolios in the Caribbean, Middle East and Mediterranean markets.
Luxury tourism in particular showed above-average resilience. The segment of travellers with daily expenditure above €300 grew at double-digit rates in 2023, driven by North American tourism, Gulf state visitors, and non-habitual residents in Spain benefiting from the special tax regime under Article 93 of the Personal Income Tax Act (the so-called Beckham Law). Five-star hotels in Madrid, Barcelona, Marbella and Ibiza closed the year with RevPAR between 18% and 25% above their 2019 levels.
For hotel investors, the higher interest rate environment increased financing costs but also opened acquisition opportunities at more attractive valuations in the midscale segment. Sale and leaseback transactions involving hotel assets gained prominence as a way to release capital without surrendering operational control. From a tax perspective, M&A transactions in the hotel sector require careful analysis of the VAT treatment applicable to the transfer of operating establishments under Article 7.1 of the VAT Act and of the potential application of the tax neutrality regime for business reorganisations under Chapter VII of Title VII of the Corporate Income Tax Act.
Tourism Sector Tax Considerations
The tourism sector operates under a tax framework with several particularities that operators must manage precisely. VAT on hotel services remains at the reduced rate of 10%, while restaurant services have also been taxed at 10% on a transitional basis. The distinction between property leasing (VAT-exempt) and hotel service provision (subject to 10% VAT) continues to generate disputes in the taxation of tourist apartments, particularly when additional cleaning and reception services are bundled in the offering.
Under Corporate Income Tax, hotel groups can benefit from the deduction for investments in UNESCO World Heritage sites or properties of cultural interest under Article 27 of the Corporate Income Tax Act, where their establishments are located in protected settings. The technological innovation deduction under Article 35.2 of the Act also applies to investments in hotel management systems (PMS), advanced revenue management analytics and guest experience platforms — areas of significant capital expenditure for modern hotel operators.
Sustainability and CSRD
Sustainability ceased to be a differentiating element and became a minimum requirement of tour operators, distribution platforms and high-end travellers. Companies in the sector with more than 250 employees will need to report under CSRD from fiscal year 2025, requiring early preparation.
The CSRD Directive (2022/2464/EU), provisionally transposed into Spanish law by Royal Decree-Law 5/2023, requires companies to prepare a sustainability report in accordance with the European Sustainability Reporting Standards (ESRS). For the tourism sector, the most relevant standards are ESRS E1 (climate change, with particular impact on sun-and-beach destinations facing rising temperatures and extreme weather events), ESRS S1 (workforce management, critical in a sector characterised by high seasonality and intensive use of labour), and ESRS G1 (corporate governance and business ethics).
The double materiality analysis — identifying both the company’s impact on the environment and society and the impact of sustainability factors on the business — must be conducted using a systematic and documented methodology. Tourism operators that have not yet begun this process face the risk of non-compliance with reporting deadlines and, additionally, difficulties in accessing bank financing under the ESG criteria of major European lenders.
Outlook and Recommendations
Spain’s tourism sector is entering a period of regulatory maturity after years of near-unrestricted growth. Companies in the sector must incorporate three strategic priorities into their planning: first, a proactive reading of the municipal, regional and European regulatory landscape affecting their assets and operations; second, a tax-efficient structure that takes advantage of applicable sector incentives — Corporate Income Tax deductions and VAT treatment in corporate transactions; and third, a CSRD reporting preparation process that is not improvised in the final quarter of the reporting year.
At BMC we advise tourism and hotel companies on strategy, taxation and ESG compliance. See our ESG and strategic advisory services.
