For hotels, fluctuating market volatility remains a constant

The MR&H event is set to take place Oct. 17-19, 2018 at the Divani Apollon Palace & Thalasso in Athens, Greece. (Thanos Papasavvas, founder & CIO of developer ABP Invest, says the hospitality industry is stable for now, but remains difficult to predict.)

The Mediterranean Resort & Hotel Real Estate Forum, part of the International Hotel Investment Forum series, will take place Oct. 17-19, 2018 at the Divani Apollon Palace & Thalasso in Athens, Greece. The event serves as a meeting place for industry professionals to network, build partnerships, secure transactions and learn for the future, and Thanos Papasavvas, founder and CIO of ABP Invest, is returning to this year’s MR&H event to host a panel on the global economic environment, with a focus on Europe and the Mediterranean.

Thanos Papasavvas. Photo credit: ABP Invest

Papasavvas participated in the event last year, where he was bullish on the prospective success of the hospitality business in the region, though he urged caution in the face of growing uncertainty. Hotel Management was able to catch up with Papasavvas and ask him how he feels about last year’s predictions today, and what he expects for the year to come.

1. Last year you described the global economic environment as ‘strong and stable, albeit with policy risks ahead.’ At the time, this meant higher volatility in financial markets. How do you feel reflecting on that observation today?

During the Mediterranean Resort & Hotel Real Estate Forum event in Tarragona last October, we identified the conundrum that, despite a number of macroeconomic and geopolitical uncertainties, the volatility in markets as depicted by the [Chicago Board Options Exchange] VIX index had been trading at an all-time low. Alongside my expectations for a stronger eurozone economy for 2018 and a stronger euro against the U.S. dollar, I also expected a pickup in volatility to more normal levels. This was also the predominant view of the audience from the Q&A session.

2. How did you identify this trend?

Stronger than expected inflationary numbers, followed by concerns that some central banks may be behind the curve, raised the alarm. The trigger being the spike in the VIX index on Feb. 5 as a couple of exchange-traded notes were unwinding loss-making positions betting against a rise in volatility. The Credit Suisse ETN lost 96 percent of its value before being redeemed.

3. From last October to now, how do you feel about the strength of the Mediterranean hotel market?

My view has not changed—volatility will remain elevated. The spike in early February was driven by technical factors, which are not likely to persist in the present economic environment, as we are neither in a financial nor economic crisis; however, volatility will remain above the levels that markets have been accustomed to over the past few years.

4. Why do you believe the industry will experience continued volatility?

There were three key reasons I identified during my presentation last October:

  • Central banks gradually taking away the liquidity which was available in the system;
  • Policy mistakes by central banks and politicians, by over-tightening conditions or not tightening soon enough, thus leading to potential inflationary or recessionary scenarios;
  • Financial markets misinterpreting central-bank and policy-makers' intentions.

5. What are your expectations for the Mediterranean hotel market throughout 2018?

My view is that volatility will remain elevated but not at crisis levels and thus will not derail the broad economic expansion. Developed markets may be in the latter part of the economic cycle but signs of recession are still not present and inflation is relatively well behaved. The one exception is the UK, where a repeat policy mistake of 'talking down the pound' post-Brexit was identical to the same policy mistake post-financial-crisis. Otherwise, the one key uncertainty for me is to see how the new Fed President [Jerome] Powell reacts to changing economic conditions and more importantly, how he will communicate with the markets.

The Mediterranean Resort & Hotel Real Estate Forum will be held Oct. 17-19, 2018, at the Divani Apollon Palace & Thalasso in Athens, Greece. Find out more at