Latest regulatory developments for the hotel sector in Andalusia

In response to the Covid-19 pandemic, the Andalusian government has approved measures aimed at mitigating the impact of the global economic crisis on the Andalusian hotel sector. This is a strategic sector for the Autonomous Community of Andalusia which, before the pandemic, generated revenues of around EUR 22,640,000, equivalent to 13% of the region's GDP.

These measures include the following:

• The simplification of urban planning regulations through the approval of Decree-Law 2/2020 of 9 March, by means of which the responsible declaration procedure ("declaración responsable") was incorporated into Law 7/2002 on Urban Planning in Andalusia.
• The relaxation of Andalusian tourism regulations through the approval of Decree-Law 13/2020 of 18 May ("DL 13/2020") which, among other things, establishes a new hotel's rating system.
• The recent incentives for the renovation and modernisation of tourist establishments through Decree-Law 14/2021 of 6 July ("DL 14/2021").

Below are the key aspects of these last two initiatives, which we consider to be of particular relevance in the current context of growing investment appetite in the Spanish hotel sector.

THE DL 13/2020 AND THE NEW HOTEL RATING SYSTEM

DL 13/2020 is likely to have the greatest impact on the hotel sector in Andalusia of all those approved in the context of the pandemic.

It establishes a new hotel rating system. Although the star classification system for hotels and aparthotels is maintained, the rating parameters are renewed and are now based on points. Following this method, the final rating of the hotel will depend on the fulfilment of a series of mandatory minimum requirements and others which have become optional. The adaptation period for hotels and aparthotels to implement the aforementioned points-based rating system is five years from 19 May 2020 (the date of entry into force of the regulation). In addition, the "Grand Luxury" qualification, which had disappeared in 2010, was recovered by virtue of this DL 13/2020.

DL 13/2020 also allows for certain real estate assets, traditionally excluded from the tourism sector (e.g. student residences), to be temporarily used for tourism purposes, provided that they comply with tourism regulations and the hotel/accommodation (hospedaje) use is permitted by the applicable planning instrument.

THE DL 14/2021 AND THE INCENTIVES FOR HOTELS' RENOVATION

DL 14/2021 came into force last Tuesday, 13 July 2021, with the aim of encouraging investment in the renovation and modernisation of Andalusian tourist accommodation establishments by making urban planning parameters more flexible.

However, the measures it establishes are not permanent. Projects for the improvement of tourist establishments will be eligible for the DL 14/2021, provided that, before 14 July 2024:

• the application for the relevant municipal license has been submitted (in the case of projects that do not require the processing of a planning instrument); or
• in other cases, the procedure for approval of the planning instrument modifying the detailed urban planning parameters of the relevant plot has been applied for or initiated in some way (even if the building permit is submitted after that date).

During the validity of the DL 14/2021, managers and owners of hotel establishments are allowed the following increases in buildability, occupancy, height and number of accommodations units:

• An increase up to 15% the buildability and occupancy attributed to the relevant plot (i) in the corresponding planning instruments; or (ii) materialised in the corresponding plot of land, if the latter are greater, provided that the reason for carrying out the increase is the execution of extension or refurbishment works.
• The aforementioned increase in buildability and occupancy may be up to 20%, in the event that the projected works are intended to increase the group or category of the hotel, or to obtain the "Gran Luxury" qualification for five-star hotels and aparthotels.
• The increase of the maximum height permitted by the urban planning instrument or the existing buildable area (if higher) to intensify tourist services on the hotel roof, such as: restaurants, gymnasiums, spas, solarium, swimming pools, etc. However, these additional facilities may not occupy a surface area of more than 30% of the roof, unless expressly permitted by the applicable planning instruments.
• Authorised accommodation units may be increased by 10%, provided that the building complies with the applicable technical regulations.

The above measures will also be applicable to buildings which have been declared as non-compliant with urban planning parameters ("fuera de ordenación"), as a result of amendments in the planning instruments approved since their construction (i.e. what is known in some Andalusian town halls as "fuera de ordenanza"). However, it will not be applicable to buildings that are totally incompatible with urban planning regulations, for which the relevant town hall has requested their demolition or expropriation.

It is important to bear in mind that many of the above measures are subject to the prior modification by the relevant town hall of the applicable planning instruments (as well as compliance with the other urban planning duties provided for in the Andalusian urban planning legislation), especially when they involve an increase of the sector's objective average building rights ("aprovechamiento objetivo") of more than 10%.

Although the above are the key points of the latest regulatory developments, the Decree-Laws we have mentioned contain additional provisions that may be of interest to certain tourism assets or to hotel managers or owners who are interested in developing refurbishment projects. We would be pleased to discuss in more detail the application of these measures to your asset portfolio.