Explotaciòn Turistica
Explotación Turística: What it is and What You Need to Know Before Investing
When it comes to real estate investment in Gran Canaria, many are still unfamiliar with Explotación Turística. This term, which in Italian could be translated as “binding management,” represents a reality that anyone who wants to invest on the island has to deal with. Let’s see what it is and why it is important.
What is Explotación Turística?
Explotación Turística is a company authorized by the tourism office to manage the rental of apartments located in privately owned residential complexes. This company can only obtain a tourism license if it has contracts with at least 30 percent of the apartments in the complex. In some cases, however, the company may even own 100 percent of the apartments in the complex, and in 90 percent of cases it owns most of the units.
Often it is the Explotación Turística company itself that sells the apartments in the complex it owns to meet expenses or to obtain liquidity. It may decide to sell one or more according to the economic need of the moment. However, other apartments for sale may belong to different owners, not part of the company, who may have a management contract with the Explotación company or who have not renewed the contract and now wish to sell the property.
Once the minimum threshold of required contracts is reached, the company can start promoting and renting out the short-term apartments on vacation portals.
Obligations of the Explotación Company
The company that manages these apartments, in addition to obtaining a tourist license, is obliged to comply with the statutory regulations. This implies the provision of a number of essential services to ensure the quality of the tourist offer. The main obligations of the Explotación Turística company are listed below:
- Regular apartment cleaning service, ensuring that accommodations are kept clean and in good condition for each new guest.
- Maintenance and upkeep of facilities, which includes continuous repair and improvement of facilities, common areas, and infrastructure of the complex.
- Front desk service, essential for welcoming guests and providing assistance during their stay, including check-in, tourist information, and emergency management.
- Security and surveillance, where required, the company must ensure the safety of guests and facilities with control systems, surveillance, and the management of emergency situations.
- Adaptation to fire regulations, including installation of fire-fighting systems, emergency signs, and evacuation plans in accordance with local safety standards.
- Emergency health services, including access to first responders or collaboration with local health services to ensure prompt response if needed.
- Accessibility, as required by regulations, accommodations and common areas must be adequately accessible for people with disabilities or reduced mobility, ensuring adequate facilities (ramps, elevators, accessible bathrooms, etc.).
- Transparency in contract management, the company should clearly inform landlords and clients about contractual rights and obligations, including rental terms, operating costs, and conditions of use of the property.
In addition, the company is required to comply with all local laws related to safety, hygiene and tourism services, including compliance with environmental regulations, responsible waste management and taking measures to reduce ecological impact. These services and requirements are mandatory for all companies that operate tourist complexes and must be guaranteed to customers as stipulated by current regulations. Explotación companies that fail to comply with these rules may face heavy penalties, including fines and license suspension.
Locked-in Contracts: Limited Freedom for Owners
Contracts made with Explotación Turística companies are highly armored. This means that the owners of the apartments within these complexes cannot use their homes to spend their vacations whenever they wish. The management of the apartment is completely in the hands of the company, which decides when and how to rent it out. If you have a management contract with the Explotación Turística company, you must strictly adhere to the contractual rules provided, which could severely limit your freedom to use the property. You will not be able to use it for private use or rent it independently, and you will have to abide by the contract you signed with the company, which sets out the conditions for using and renting the property
Why is it referred to as "Submission"?
If you are a property owner in a complex managed by an Explotación Turística and wish to rent your apartment to tourists, you cannot do so on your own. You will have to sign a contract with the company to avoid complaints of unfair competition. In other words, you are obliged to cede management of your property to the company, giving up control over how and when you rent it out.
Why Do Many People Fall Into This Trap?
Many people unfortunately fall into this trap, attracted by the lower price compared to market values. Often these are inexperienced investors, or cases in which thereal estate agent himself is unfamiliar with the regulations regarding Explotación Turística and does not properly inform the client. In other cases, the agent’s only goal is to take his sales commission, deceiving the buyer. Many times, you are told that the apartment is not in Explotación Turística, but here’s where the shoe drops: the apartment may not have a direct contract with the Explotación company, but if there is a management company within the complex, once you buy it, if you want to rent it, you will have to give it to the Explotación company only. So money thrown in the trash because the profits from giving it under management are really paltry.
What are the Profits?
Although the company that manages the Explotación Turística takes care of the condominium expenses and utilities, the profits for the landlord are small compared to a self-managed rental. We are talking about €4,500 per year, or about €375 per month, which is much less than what could be earned from a self-managed short rental.
Investing in Complexes under Explotación: Does it pay off?
Although the purchase prices of these properties may seem attractive (between €80,000 and €110,000, much lower than in the open market), it does not pay to invest in a complex under Explotación Turística. Restrictions and contractual constraints make it difficult to fully enjoy the property or get a satisfactory financial return. In addition, management is completely centralized, leaving very little decision-making space for the owner.
The Decline of Many Exploded Complexes.
Many complexes are now out of Explotación Turística because the companies that managed them have gone bankrupt. In my opinion, this is due to the chase for the lowest price, never making adequate renovations to the accommodations that have aged over time. As a result, they could no longer cover their operating costs, leading many of these companies to bankruptcy.
My Experience with Clients
One case I remember well involves a client who had decided to buy a property in a complex under Explotación, despite my warnings. Convinced she had found a “bargain,” she ignored my advice, only to regret it a few months later when she realized she could not rent or use the property as she wished.
What to Do to Avoid Mistakes
My advice is to rely on experienced real estate advisors who know the Gran Canaria market well. A low price may seem attractive, but it often hides constraints that could jeopardize your investment. A serious advisor will warn you and help you make informed choices, preventing you from burning your savings.
Be Wary of Agencies that Don't Know the Law
One of the most common problems is that many investors rely on real estate agencies that do not fully understand the Explotación Turística regulations. This can lead to erroneous investments, where you find yourself bound by contracts that limit your freedom of use and your profits.
Investing with those without direct experience in the short-term rental market is a mistake that can cost you dearly. Nonspecialized agencies may not know if a property is bound by Explotación Turística, or worse, they may neglect to inform you about the risks involved in buying these properties. So, be wary of those who do not know the regulations or who offer you seemingly advantageous solutions without real knowledge of the local market.
Invest With Those Who Know What To Do
My experience in Gran Canaria real estate and short rentals allows me to help you make informed and focused choices. An inspection and personalized advice are essential to assess whether a property is a real opportunity or a risky investment.
If you want to avoid nasty surprises and ensure a satisfactory financial return, contact me for advice. I am here to help you make an investment that is truly profitable and risk-free.
Investing in the tourism real estate market can be extremely profitable if done with the right knowledge and the support of those who know the area and local regulations well. Don’t let an opportunity turn into a trap. Contact me today to discuss your next investment and to arrange a site survey. Together we’ll evaluate the best options for achieving your return goals with confidence.
Daniele Piccoli +34 635632009 +39 3518711203
