Greece attracts global hotel investment and development

Athens

In just a year, Greece has gone from a risky prospect to a must-have destination for global hospitality investors. In spite of all the country’s hardships in 2015, Greece saw an increase in hotel stays of nearly 4 percent in 2015 compared to 2014, and occupancy improved nearly 2 percent, according to the Hellenic Statistical Authority (known as ELSTAT). 2016 has proven to be even better, with arrivals growing by 753,000 or 6.5 percent in the eight-month period from January to August compared to last year.

Branded hotels are responding: Late last month, Choice Hotels signed a multihotel agreement with GVK Enterprises to develop a portfolio in the country to run under the group's brands. 

The deal came as Ikos Resorts added two properties in Corfu, with investors and operators hoping to ride the recovery in the country's fortunes upwards, as many have Spain and Italy, despite recurring fears over the impact of Europe’s migrant crisis. 

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At Choice Hotels International, the company is making its first move in Greece, with the first property under the agreement due to open by the summer 2017 under a Comfort flag in Athens. The portfolio will then expand with the addition of four more sites on the Greek mainland and islands under the Comfort, Quality and Clarion brands.

Choice followed franchise rival Wyndham Hotel Group into Greece, with the company planning the Wyndham Grand Athens, its first hotel in the country, for an early 2017 opening following extensive refurbishment of what is currently the Hotel Athens Imperial.

“This is only our first stop in Greece, as we see opportunities for many of our brands across the country, from city centers such as Athens and Thessaloniki to resort destinations in the Greek islands and mainland,” said Dan Ruff, president & managing director EMEA, Wyndham Hotel Group.

In October, Marriott International signed a new agreement with Chandris Hotels that will bring the Marriott brand back to Athens after an absence of more than two years. The Athens Ledra Marriott, the last Marriott-branded hotel in the city, closed in December 2013. 

Why Greece is Hot

Hotel performance has seen a recovery since February, when the refugee crisis peaked and STR reported a 6.3-percent drop in occupancy. In the third quarter Greece reached an absolute occupancy level of 81.9 percent (+5.8 percent), the highest on record for a third quarter in the country. ADR also increased 2.2 percent to €144.49, resulting in an 8.1-percent increase in RevPAR to €118.35. 

July was Greece's strongest growth month of the quarter, with a 9.5 percent increase in RevPAR, while September produced the highest occupancy level (84.3 percent). In September, weekday business drove performance, with 11 days of double-digit RevPAR growth during the Sunday to Thursday periods throughout the month.

The recovery in performance has attracted not only operators, but also investors. “There are plenty of investors casing investments in Greece, a lot of private equity houses are looking for opportunities in the resort market,” Graham Craggs, managing director, EMEA hotels, JLL hotels & hospitality, told HOTEL MANAGEMENT. “Although some of them may be disappointed, the supply is not necessarily there. 

“There’s no shortage of demand, looking to maximize returns. From an operational perspective the market’s good, it’s about getting distribution right. I’m not convinced there’s an opportunity for the big brands in the leisure market, it’s dominated by the independent market and it’s hard to see that changing, but in Athens and Thessaloniki there is value to the brands, there is logic to the offering.

“The economy has been through quite a few issues, but resorts are catering for overseas demand and the performance has been strong. There are some hotels where there might be some distress, but given that performance has been okay in many resort hotels, no one is desperate. There are some great opportunities—Oaktree have managed to find one in Ikos.”

Ikos Resorts investment fund has expanded its partnership with the Chandris Group, buying two Chandris properties in Kerkyra, the Corfu Chandris Hotel & Villas and the Dassia Chandris Hotel & Spa. The company plans to create a 410-room property. In addition, Ikos has acquired the former Club Med on Kos, to be converted to Ikos’s all-inclusive resort format.

“We want to build on the achievements of the last two years, to further develop the Ikos brand and introduce the ‘Infinite Lifestyle’ concept to Kos and Corfu,” said Andreas A. Andreadis, CEO, Ikos Resorts. “We will continue to invest not only in Ikos Resorts, but also in the local economies by employing local people and the continued overall development and progression of Greek Tourism.”  

The “Infinite Lifestyle” concept is an all-inclusive product. 

According to a source close to the deal, the hotels are currently shut for the winter and will remain shut during the 2017 season. The buyer will be undertaking a “substantial” refurbishment program prior to re-opening the re-branded hotels. The renovated properties will open ahead of summer 2018, with the Kos property launching in 2019. The total investment in the three sites, including renovation, is expected to be €200 million. 

Ikos is a joint venture between a consortium of financial investors, led by Oaktree Capital and the Andreadis brothers, the original owners of the Sani Resort in Thessaloniki, which now forms part of the joint venture. The group was created two years ago, with the two new sites taking it to four properties.

For investors, as in Italy, there are still slim pickings as there has been little appetite to shake out the financial system and bring distress to the market. “I think that there are Non-Performing Loans and I suspect that the banks are going to be under pressure to deleverage, but we haven’t seen many individual hotels coming onto the market, or slugs of NPLs where hotels form a part,” Craggs said.

Greece became the focus of Europe’s migrant crisis, with many refugees being held on the country’s islands. A deal was agreed with Turkey in March, whereby the EU could deport migrants who failed to claim asylum from Greece back to Turkey, which saw the number of refugees in Greece fall. In return, the EU allowed equal numbers of Syrian refugees from Turkey and held talks on visa-free travel for Turks.

However, at the time of writing, the European Parliament voted to suspend Turkey's EU membership talks because of the Turkish government's crackdown since a coup attempt in July, with the result that many fear the country could renege on its agreement over refugees, putting Greece under renewed strain and making it less attractive to tourists. 

For those prepared to swap risk for return, the reward may be a little further off. 

Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.

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