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JULY 2011

MARKET INTELLIGENCE REPORT MADRID 2011

THE ONLY WAY IS UP
Esther Gladen, Business & Market Intelligence Analyst Philip Bacon, Managing Director

www.hvs.com

HVS Global Hospitality Services |c/ Velázquez 119, 5º A, 28006 Madrid, Spain

Market Intelligence Report Madrid 2011
The following article guides the reader through the Urban Hotel Market of Madrid, dealing with thedevelopment of the market during 2010 and the beginning of 2011 with a view to the immediate future for the city.

SUMMARY OF KEY % VARIANCES - 2010 VERSUS 2009

Ý Airport Arrivals (variation of total)
Domestic International

All Nationalities

3,32% -1,32% 6,38% 9,80% 5,90% 14,20% 30,61% -10,50% 9,37% 14,11% 18,84%

Ý Visitors (variation of total)
Domestic International Highestincrease Highest decrease

All Nationalities

Russian Source Market Czech Source Market

Ý Occupancy

By rooms Winner category (January to April comparison) 5-star Best month (all categories) June 2010

Þ ADR
Loser (variation of yearly average) Worst month Best month 5-star February 2010 May 2010 -4,21% -8,73% 4,45%

Ý RevPar (variation of yearly average)
Gold medal Silver medal 5-star4-star by rooms 5-star 1 & 2-star 10,01% 3,67% 4,48% 9,02% -7,41%

Ý Supply (variation of total)
Highest increase Highest decrease

* ADR, Occupancy and RevPar compari sons do not i nlcude 1&2-star hotel s)

MARKET INTELLIGENCE REPORT MADRID 2011 – THE ONLY WAY IS UP | PAGE 2

The Economy in Spain
Spain has suffered badly from its own and the world’s economic crisis and is still not out ofthe danger zone. This year GDP is expected to grow only 0,8% and to recover slowly over the next four years to reach a forecast growth rate of 2,20% in 2015. In 2009 (latest available data) Madrid’s GDP was more than 12% of that of the whole country and nearly Did you know that …….. 68% of that of the Comunidad Autónoma de Madrid (Greater Madrid). The Madrid City is the second unemployment ratein the first quarter of 2011 was 21,29%, taking the biggest city in Europe country close to the quite terrifying barrier of five million people out of after Berlin? It has work. In Madrid, the unemployment rate is approximately 4,5% lower approximately 3,3 millon than the average rate in the country. inhabitants, 7% of the The political situation in Spain is stagnating as well, as the currentleader whole country and twice as many as Barcelona. José Luís Zapatero experiences a lack of support within his own party PSOE (Socialist Party) and strong pressure from the Partido Popular (Conservative Party) which is trying to bring forward the general election due in 2012, expecting to win comfortably after their success in the recent local government elections, after which, in Madrid, the PP hasalready reinforced its existing controlling position. The winds of change are blowing in Spain as one of the very few remaining socialist governments in Europe awaits its fate at the hands of a very disappointed and worried population. The view of leading economists and politicians is that a proper recovery of the Spanish economy cannot be achieved before 2013, due to the lack of employmentopportunities and national purchasing power. As a consequence of the restructuring of the banking sector, credit and financing are very difficult to obtain and even though GDP is slowly increasing, many more measures are needed to get the economy going again.

TABLE 1: ECONOMIC INDICATORS FOR SPAIN (EIU)

Real GDP growth (%) Consumer price inflation (av; %) Budget balance (% of GDP) Curr.acc.balance(% of GDP) Short-term interest rate (av; %) Exchange rate US$:€ (av)
Source: EIU May 2011

Historical Data 2006 2007 2008 4 3,6 0,9 3,6 2,8 4,1 2 1,9 -4,2 -9 -10 -9,8 3,1 4,3 4,6 1,26 1,368 1,47

Forecast 2009 2010 2011 2012 2013 2014 -3,7 -0,1 0,8 1,3 1,7 2,1 -0,2 2 3,1 2 1,9 1,8 -11 -9,2 -6,5 -5,4 -4,1 -3,2 -5,5 -4,5 -3,6 -3,1 -2,7 -2,2 1,2 0,8 1,3 1,9 2,8 3,5 1,39 1,33 1,36 1,3 1,23...