Results from the Greek referendum on Sunday showed voters soundly rejecting the terms of an international economic bailout. Greece's governing Syriza party encouraged its citizens to vote "No" on the bailout, saying the terms imposed by other European nations were tantamount to blackmail.
The "Yes" campaign warned that rejecting the terms could see Greece ejected from the eurozone. Some European officials had also said that a "No" would be seen as an outright rejection of talks with creditors. But Greek government officials have insisted that a "No" vote would strengthen their hand and that they could rapidly strike a deal for fresh funding in resumed negotiations. They expect Greek banks to reopen by Tuesday.
German Chancellor Angela Merkel and French President Francois Hollande announced after the voting had ended on Sunday that they would meet in Paris on Monday evening (local time) to discuss the results and the country's future role in the eurozone.
Meanwhile, Yanis Varoufakis, Greece’s finance minister, who took a strong stand in demanding that creditors write off some of his country’s debts, abruptly resigned on Monday morning. Varoufakis had played a key role in rallying votes for a resounding “no” on the referendum, and as The New York Times noted, Greece’s eurozone creditors may be more willing to continue negotiations on a further aid package without him. His departure, reportedly at the urging of Prime Minister Alexis Tsipras, could be seen as a concession to the sensibilities of other eurozone leaders, whom Varoufakis allegedly alienated. "I consider it my duty to help Alexis Tsipras exploit, as he sees fit, the capital that the Greek people granted us through yesterday’s referendum," Varoufakis posted in his blog. "And I shall wear the creditors’ loathing with pride."
Greece is top of mind for many hotel investors and will be a focal topic during the 2015 Mediterranean Resort & Hotel Real Estate Forum (MR&H), Nov. 9-11 at the NH Collection Madrid Eurobuilding. More than 40 industry leaders have already been confirmed as speakers, including: Taleb Rifai, Secretary-General of the World Tourism Organization; Hervé Louis, CFO of AccorHotels, Africa, Middle East, Indian Ocean and Caribbean Islands; Keith Evans, VP of hotel acquisitions for Starwood Capital Europe Advisers; and Federico J. González Tejera, CEO of NH Hotel Group. For a full listing of speakers, panel sessions, registration and further information on the conference, visit www.mrandh.com.
As a result of the vote and current volatile situation in Greece, the country's banks are at risk of collapse in the coming days, and the country could be forced to leave the EU. Investors may refuse to lend Greece money at almost any cost, as banks and the government lack essential funds to operate. Over the weekend, former U.S. Treasury secretary Larry Summers wrote:
"Greek banks will run out of cash early in the week, probably on Monday. There will be an immediate need to either provide them with some sort of IOU scrip to meet demand for funds or to resolve them in some way, as Greece lacks the capacity to create Euro. What the Europeans do and the decisions the Greeks make will shape the future of Greece and the Euro area."
Travel and Hospitality Impact
Though the current situation in Greece is tumultuous, it could prove opportune for Greece's travel industry. The instability and stimulus program by the region’s central bank have sent the euro plunging against the dollar. The currency hit a 12-year low in March of $1.05. It began to grow again in the ensuing months, but began sliding again in mid-June as the crisis in Greece became headline news. It currently sits at $1.11.
This means that the American dollar is now much stronger throughout Europe than it has been in years, meaning visitors may well be able to not only stay longer, but upgrade their hotel and travel experiences.
Several travel sites have advertised deals on European vacations. Orbitz touted Greece as “a world of destinations,” and Lufthansa named Athens its “pick of the week.” (The Post noted the irony in Germany's flag-carrier promoting Greece's capital, as Germany has drawn the hardest line among European nations in negotiations with Greece.)
Tourism accounted for about 16 percent of Greece’s economy as of 2013 and supported 657,000 jobs, according to the World Travel and Tourism Council. The Australian Financial Review noted that international tourist arrivals to Greece rose almost 21 percent in 2014 to more than 24 million. Hotels, restaurants and bars had expected similar growth this year, but with the recent news, "many" visitors have canceled their Greek trips while others arrive with wallets "stuffed" with euros.
According to the country's ferry operators' union, bookings for journeys around the Greek islands are down 30 to 40 percent from the same period last year, and schedules are being pared back to conserve fuel.
The Future of International Investment
Greece's collapse could be a boon for foreign investors, as Greek real estate may prove valuable for international investors as prices continue to drop. As Gulf News writes, there could be a group of distressed asset sales; however, it makes the case that assets owned by UAE and GCC-based high-net-worth investors will probably stay put.
The situation may be different for institutional investors and the owners of commercial property, and would depend on whether Greece exits the eurozone. If it does exit, Greece’s new currency would depreciate quickly with prices relative to the euro and dollar dropping, as well. As Gulf News writes, though, "Prime real estate, however, will not depreciate as quickly and will sustain themselves better in relation to the overall economy. If an investor is convinced of a eurozone exit they may be compelled to sell off their property before a new currency is put in place, in order to conduct the transaction in euros.
The situation is still one of fluidity, so it's still anyone's guess if it is wise to enter or exit the Greek economy.
One thing is fairly certain, anyone looking for EU-wide benefits should steer clear of Greece. As David Godchaux, CEO of Core Savills, told Gulf News, "It would not be advisable for anyone looking for EU-wide benefits to consider Greece since the country has a long road ahead in terms of fixing its economy and avoiding the many pitfalls which lay ahead...It all depends on how the relationship between Greece and EU develops over the coming period and the results of the referendum which will shape policy...and possibly see a change of leadership in the country."