The Greek hotel industry is coming back as travelers rediscover its charm, beaches and antiquities, but hoteliers realize that numerous challenges remain in the country, especially for domestic operators and investors.
REPORT FROM GREECE—The Greek hotel industry has turned a corner, but there still are many concerns among operators and investors, according to sources.
Domestic banks remain reticent about or are unable to lend money to hoteliers.
“We are starting to stand on our own feet, and in all these very tough years, the only thing to be positive, year after year, is tourism,” said Angela Michalopoulou, director general of investments at state investment body Enterprise Greece.
Michalopoulou said Greece’s gross domestic product rose 1.7% in 2017, and inbound investment increased by 35%.
“There also has been a slight drop in unemployment, which was 27% and is now 20%; although, for those under 30, it remains very high,” she said. “There are still a lot of things to do.”
Petros Stamatogiannakis, CEO of the Stamatogiannakis Group of Companies, agreed that tourism is the only sector with potential. His company’s Oceanos Hotels Group division has 18 hotels in Crete as well as single assets in Mykonos and Sounion, just south of Athens.
“There is a really good sales percentage in hotels,” he said. “Of course, it is a good time for investors to invest in tourism in terms of acquisitions. The real estate market in Greece is in good shape, quite cheap in comparison with other destinations.”
Stamatogiannakis Group also manages a recently formed destination management company called Sigma Hospitality Group, which Stamatogiannakis said has potential as tour packages have grown in line with the re-emergence of travel to Greece.
According to STR, the parent company of Hotel News Now, hotel occupancy for all of Greece increased in 2017 by 4.8% year over year to 72.3%, average daily rate increased 7% to €119.74 ($148.07) and revenue per available room increased 12.2% to €86.53 ($107.00).
In Athens, hotel occupancy rose 5.6% to 74.6%, ADR grew 3.9% to €119.33 ($147.56) and RevPAR grew 9.7% to €89.06 ($110.13).
Michalopoulou said several developments have aided Greece’s hotel industry, namely infrastructure upgrades. The country has made improvements to 14 regional airports, and a new airport in Crete is due to open later in 2018. Also this year, Greece has begun the partial selloff of its international airports, which includes American and Australian investors. The completion of the freeway between Patras—on the northern coast of the Peloponnese and Greece’s third-largest city—and Athens has cut driving time to 90 minutes.
Greece has also unveiled its Golden Visa program for those investing €250,000 ($309,140) or more, and lawmakers have simplified legislation, including regulations pertaining to hotel development, she said. Developments of more than €100 million ($123.6 million) outside of urban areas or projects promising more than 120 jobs have a shorter path to approval.
Finding sites, funds
Finding destinations and debt are two significant concerns in the Greek hotel industry, sources said.
Michael Hay, founder and managing partner of Israeli development firm Vision Hospitality, said “the main challenge is to find sites.” Hay said Israeli hotel concerns are now back in Greece after pulling out due to concerns about the direction of the country’s politics.
Michalopoulou said finding sites is frustrating, despite the presence of numerous vacancies.
“Forty percent of the buildings in Athens are empty, but nothing is ready,” she said. “A lot of groundwork needs to be done. Valuations are very low, though, and that remains the opportunity.”
Greece’s other important cities also are seeing some development.
Thessaloniki is seeing more travelers from the Balkans, and Patras will see a boost from infrastructure improvements, Michalopoulou said. Marriott International is opening a Moxy property in Patras in partnership with Greek real estate firm Pangaea, and majority owner Invel from the U.K. Russian billionaire Dmitry Rybolovlev is developing the Greek island of Skorpios, once owned by shipping magnate Aristotle Onassis.
But for domestic hotel firms, access to debt is far more difficult, Stamatogiannakis said.
“The banking situation is not good, and it is not open to new investments,” he said. “Funds are not easily given to hotel companies and local tour operators. The main investment in Greece all comes from foreign sources.”
Michalopoulou said the European Central Bank is back again and supporting local banks who want to start lending, but Stamatogiannakis said he does not see this capital reaching the hotel industry.
“The ECB is of course providing important funds to Greek banks, but if you are a Greek registered business you have to go through the local banks, and it is a closed system, one not easily opened,” Stamatogiannakis said.
On 27 March, the European Stability Mechanism approved an additional €6.7 billion ($8.3 billion) of funds to Greece, which was largely regarded as acknowledgement that Greece is turning itself around in terms of financial responsibility.
Another advantageous trend, Michalopoulou said, is what she called a “total transformation of labor.”
“The unions have no power anymore,” she said. “This has seen wages become lower, but with unemployment being so high, how bad can it be?”
Michalopoulou said currently there are 12 hotels in the pipeline in Athens, with the development trend being office conversions. Serviced apartments also are seeing a rise in the city, she added.