Last month, Thomas Cook Hotel Investments, a joint venture between Thomas Cook plc and Swiss hotel development group LMEY Investments, raised €40 million to invest in hotels around the Mediterranean through a debt agreement with Piraeus Bank, an Athens-based financial services company. Exactly where and when those funds will be deployed remains to be seen.
“It is my understanding that the €40 million raised as part of Thomas Cook's hotel fund, representing additional funds on top of the £150 million co-invested with LMEY investments, will be spent on developing new hotel projects under Thomas Cook’s array of hotel brands in select Greek locations, most likely on the large mass-tourism Greek destinations such as Crete, Corfu, Kos and Rhodes,” said Themis Trakas, director, consulting and valuation, HVS. “There are plenty of great spots on large Greek islands to develop new resorts, although Greek public-sector bureaucracy can create delays.”
The company also is reportedly seeking larger tranches of funding to acquire more properties around the Mediterranean, with a number of discussions with lenders underway. Thomas Cook has not yet officially identified any specific sites for purchase.
In a statement, Piraeus Bank said it viewed tourism funding as a key priority. “With a tourism portfolio in excess of €2 billion, the bank supports tourism businesses and honors its commitment to enhance healthy entrepreneurship and lead the restoration and growth of the Greek economy.”
The Tour Operator's Hotels
Thomas Cook Hotel Investments currently includes hotel properties on Rhodes, Crete, Mallorca, Ibiza and mainland Spain. Thomas Cook Hotel Investments was investing more than €7 million in its Sunwing Kallithea hotel in Rhodes this winter and is opening a new Casa Cook in Ibiza in summer 2019.
The fund was established in March to support the growth of Thomas Cook’s own-brand hotel portfolio as part of the company’s strategy of delivering greater control over its hotel inventory and customer experience, with plans to have 10 to 15 managed hotels in the fund by 2020. It currently has eight.
Thomas Cook and LMEY created the platform through the contribution of a minimum of five owned and directly-managed hotel properties between them, with a combined value of around £150 million. Its strategy was to acquire underperforming, distressed and underinvested hotels in Thomas Cook’s core destinations and transform them into own-brand hotels.
Related: Thomas Cook raises €40M for Med development
The fund sits off the balance sheet at Thomas Cook, with the tour operator drawing on its experience in hotel management, while LMEY has the expertise in hotel development, freeing up the pair to look for investors outside the sector.
According to a Thomas Cook spokesperson, the company has been negotiating with various banks to fund further growth. “Greece is where we have the most of our own-brand hotels and earlier in the summer we held an event in Crete at our new hotel concept [Cook’s Club] to create interest in working with us, through management or franchise or even through selling a hotel to our fund.
“We are in the process of securing further funding and we will update the market on the progress of our fund at our full-year results in November.”
Greece’s Return to Favor
As Thomas Cook reported in its most-recent trading update, there has been a return to favor of Greece as a holiday destination. The tour operator is eager to secure hotels as visitors return.
Related: Lack of quality stock poses barrier to Med hotel investment
Tourism traffic to Greece continued its growth into August, with Greek destinations welcoming more than 6 million travelers, an increase of 4.8 percent on the year, according to provisional data released by the Bank of Greece.
Greece has started to recover after the downturn and with it came a realization of the role that tourism plays in the country’s economy. The Greek government is eager to invest in its future and recently awarded the contract to build and run an airport on the island of Crete to a consortium led by India’s GMR Airports and GEK Terna Group of Athens. The project is due to start construction at the end of next year, with the hope that it will be able to take over from the overcrowded Heraklion airport within five years.
As such, Thomas Cook Hotel Investments is likely to face competition in its hunt for real estate.
Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.