Because the moratorium limits new resort building, the most available opportunity in Canary hospitality is not construction but transformation: buying an ageing, obsolete or underperforming resort and repositioning it into something current. This is a value-add play in one of Europe’s strongest tourism markets, and it comes with a specific set of incentives, risks and disciplines that an investor has to understand before falling for a discounted price.
Why the opportunity exists
The Canaries have a large stock of tourist accommodation built in earlier decades, much of it now dated, under-invested or below the standard today’s visitor expects. In a market where new resort beds are hard to authorise, that obsolete stock is where the value sits: it can be bought at a price that reflects its tired condition, and turned into an asset that commands current rates. The gap between what the asset earns now and what it could earn after work is the whole thesis, which is the value-add logic we set out in our note on core, core-plus and value-add.
The incentives reward exactly this
Renovation and repositioning of obsolete tourist establishments are precisely the kind of investment the Canary regimes encourage. The moratorium treats quality upgrades differently from new capacity, and the reserve for investments in the Canaries rewards committing profit to productive assets in the islands, which a refurbishment is. We set the reserve out in our note on the RIC. For a repositioning investor, the tax regime and the planning regime point in the same direction, which is unusual and valuable.
The moratorium closed off new building and, in doing so, made the tired old resort the most valuable thing on the island: the one asset you are allowed to transform.
What the work actually involves
Repositioning a resort is more than a refurbishment. It can mean moving the property up a category, changing its target market, reconfiguring rooms, adding facilities, and often re-permitting the changed use. Each of those has a cost, a timeline and a planning dimension, and the capital budget is where these projects most often go wrong, because an old building reveals its problems only once work starts. The discipline is the same as any value-add asset, set out in our note on the business plan behind a managed asset: a costed plan, a realistic contingency, and a downside case.
The risks specific to the Canaries
Beyond ordinary construction risk, a Canary repositioning carries local specifics: the planning status of the existing establishment, whether the changed use can be authorised, the treatment of any protected or non-conforming elements, and the position of any tour operator contracts attached to the property. An investor buying an old resort is buying its history as well as its bones, and the diligence has to cover both, which is the discipline in our note on legal due diligence before you buy.
Why it is worth the trouble
A successfully repositioned Canary resort combines a value-add gain, a year-round tourism market, and a tax regime that rewarded the investment. That is a strong combination, and it is available precisely because the moratorium made new building hard, concentrating the opportunity in transformation. For an investor with the capability to execute the work, the tired old resort is not a problem asset; it is the point of entry.
Montclare structures and operates investments in the Canary Islands, from the ZEC and the RIC to hotel and real estate assets on the ground. Our services are set out on our services page.
This article is informational and does not constitute tax, legal or investment advice. The Canary Islands regimes have specific conditions and change over time; treatment depends on the facts. Each engagement is subject to scope and applicable regulation.