Vinicius Jr, Fede Valverde and Gonzalo Garcia struck the goals for Real.
Afterwards, Xabi said: "I'm satisfied with the team's performance. There was a move in the second half where the team's defensive reaction after a corner was spectacular, and everyone's sacrifice was important. Without that, it's impossible nowadays."
"There's still a long way to go in the World Cup, and we know that Juventus are waiting for us in the last 16. Juve are Juve. I have the utmost respect for them, and we have to prepare well for that game. It's a case of either you go through or you go home, so we have to be ready.
"Despite that, I'm happier with today's game than with the first half against Al Hilal. We're still in the early stages, and we're taking it cautiously. There's still a long way to go. We're starting a new era, and we're making changes in the middle of a demanding competition. During this time, we've been clear about our strategy, although there's still a lot to improve on."
Happy with goalscorers Vini Jr and Gonzalo
Xabi also said of Vini Jr's performance: "Vini Jr. had a great game. I'm not just talking about his goal and assist, but also his defensive sacrifice, knowing how to get involved, not getting caught out...
"That allowed us to play closely together, and in attack, he had more freedom, getting into the area well and linking up with Gonzalo, who wears down the centre-backs. He came away feeling very positive, as did I. However, we have to keep going because there's still a long way to go."
The coach also had a word for young forward Gonzalo.
He added, "I know him very well. I've followed Castilla very closely and I know their players very well. I'm not that surprised. He's a typical number nine who reminds me in many ways of Raúl: always well-positioned and with a great work ethic. We need more from him, and we're working to help him improve.
"No decisions have been made yet regarding next season. We're focused on the Club World Cup. The competition gives you indications, but no decision has been made."