The Changing Landscape of the Greek Hotel Investment Market

MAY - JUNE  ISSUE NO. 6 |  Debt Business Magazine

By: Kenny Evangelou

CEO, Xenium Advisors, Greece

Backdrop: Strong Tourism Growth

Greece benefitted from 7 years of solid growth in tourism between 2013 and 2019, with tourist arrivals increasing from 11.7 million in 2013 to over 31.3 million in 2019 (almost 3x the population of Greece), achieving a CAGR of 8.3%.

Arrival numbers have been significantly helped by increased air connectivity, particularly from low-cost carriers, as well as the privatization and upgrading of 14 regional airports.

Likewise, tourism receipts achieved a GAGR of 6.5% between 2013 and 2019, and were up by 13% vs 2018 (or about 6x GDP growth).

In 2020, tourism arrivals in Greece, as in all international destinations, were adversely affected by the Covid-19 outbreak. Whilst Greece took timely measures to control its spread, non-resident arrivals and spending were down by almost 80%. The largest drop was witnessed by U.S. and Russian tourists (-90% and -95% respectively).


Forecasts for the upcoming season are subject to many uncertainties and much depends on the roll-out of the Covid vaccination program in Greece and its key source markets, and the lifting of travel restrictions. Performance in 2021 is unlikely to exceed 50% of 2019 levels at best. A full market recovery is not expected until 2023.

Increasing Investor Demand: Right across the Spectrum


As visibility improves, we are currently witnessing a resumption of investor activity. With the cost of capital still very low, there are many yield-hungry funds currently looking for opportunities, particularly given that the level of deal activity over the last year has been low.


Not unsurprisingly, most interest in the hotel market is for larger beach-front hotels in the main tourist destinations of Greece, mainly those that have an airport close by, either on the large islands or the mainland. Particularly those that are mis-positioned, poorly managed, and under-performing, with expansion and upgrade potential (e.g. from 4-star to 5-star). Between 2010 and 2020 the stock of 5-star hotel rooms in Greece has more than doubled (CAGR of 7%), in line with the rapid growth in global wealth and HNWI in recent years.  

Demand is right across the investor spectrum, including large institutional investors, private equity funds, local and international hotel companies, and local and international family offices.  Basically, any investor who has access to equity and debt.


Increasing Supply: NPL Resolutions Accelerating   


Increasingly, the supply of assets stems from NPLs and the large over-hang which still exists from the 9-year economic crisis in Greece. New NPLs are also expected to be formed as a result of the COVID crisis.

The COVID lock-down of 2020 and the freezing of legal and auction proceedings interrupted banks’ and servicers’ efforts to find solutions for their hotel-backed loans. However, as the system opens, and work-out efforts/legal actions against borrowers mature, we anticipate more assets being available for sale, either on a consensual basis, but more likely via foreclosure and auction or, for the larger hotel assets, via special administration/receivership procedures and liquidation. Newly transferred NPL portfolios and upcoming portfolio sales will drive further activity in the months and years ahead.


Of course, not all investors are willing to buy at auction, given the limited ability to undertake due diligence, so the owners of the loans will face the challenge of repossessing, asset managing and then selling on the asset in the future.

Pricing: Steady at the Τop


There has been a lack of transaction activity over the last year and therefore a lack of clear pricing benchmarks. However, most hotel investors have not changed their investment strategy and the weight of capital chasing good quality assets is limiting price discounts - an investor looking to buy a hotel asset now to reposition it, is not looking at this season, and probably not next season either. Year one of the operational business plan will be 2023 i.e. assuming “normal” market conditions. Looking forward, smaller, and more secondary quality hotels, which comprise a majority of the collaterals in NPL portfolios, are however likely to face downward pricing pressure, particularly as more assets come to auction. 


Changing Landscape: Professional Investors and International Brands


Overall, a large transfer and consolidation in ownership of hotel assets is anticipated in the coming years, a process which started about 3 years ago. Many assets will pass from e.g. family businesses or businesses whose core activity is not hotels, to professional investors and managers with access to capital. In turn, this will drive a further repositioning and upgrading of many assets on the one hand, and also the influx of international brands on the other (current brand penetration rates in Greece are relatively low, but rising rapidly). The diversity of the hotel landscape is also changing rapidly, with new formats being rolled-out to cater for changing guest needs, including themes such as adults-only, wellness, and eco-friendly. We are also witnessing an increase in the development pipeline of integrated resorts, combining branded residences. The hospitality product in Greece will undoubtedly step up to a new level in the coming years.


Xenium Advisors Company Profile

Xenium Advisors is a leading specialist advisory firm with a focus on the Hospitality sector. We are headquartered in Greece, with offices in Italy and Romania, covering all of South Eastern Europe. Our team combines a unique blend of hotel operations, technical and investment and finance expertise, enabling us to provide a broad spectrum of advice and support to hotel owners, operators, investors, developers, financiers and loan servicers. Our services include Due Diligence and Underwriting, REO and Asset Management, Valuation and Investment Advisory, Interim Management, Transaction Advisory, and Brand and Operator Selection. We have particular experience in distressed and turn-around situations.

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