2016 MARKET SNAPSHOT
During 2016 investment activity in the hotel market focused mainly in renovation of existing hotels and reconfiguration of commercial buildings and conversion into in accommodation facilities. Investment activity was mainly focused on 4* and 5* hotels and the available stock increased by 14 and 40 hotels respectively, an increase of 3.5% and 3%.
The positive developments in recent years in the hospitality industry, the partial recovery of the political and economic stability, the recognition of Greece as a safe European destination, the general instability in neighboring countries along with the certain upgrades in infrastructure have led to positive results and encouraging commercial activity in 2016.
At the same time, the country continues to face a number of economic and political challenges and uncertainties that have delayed the strengthening of growth in the sector. In addition, the unresolved refugee crisis and the uncertainty from political developments in Europe (e.g. Brexit referendum etc.) impacted demand and certain destination choices.
The majority of investments targeted upgrades in existing hotels through the modernization of facilities and offered services. New developments in the market were limited. The available stock was also enriched with lower capacity units, such as boutique hotels. The identified trend led to an increase of the boutique hotels’ share in the domestic hotel market. Growth prospects for this segment remain positive through the development of new facilities and the upgrade of existing stock.
In wider Athens region, investors’ interest for 4* and 5* hotels followed the national trend. The increase in tourist arrivals in Athens also triggered hoteliers’ interest, domestic and non-domestic, for the renovation, acquisition and development of more luxury hotels.
2017 MARKET OUTLOOK
The country’s ranking as one of the top tourism destinations worldwide, its classification as a safe destination in the wider region, the encouraging returns of international tour operators, the arrival of new global hotel operators and the promotion of Athens and Thessaloniki as city break destinations will continue to have a positive impact on the investment flows and commercial activity in the hospitality real estate and related leisure sector.
Nonetheless, a series of challenges remain ahead. As an example, the persistent domestic macroeconomic instability has led to, among other things, underinvestment in the needed improvement of major transportation infrastructure and unpredictability in the hospitality business tax regime. At the same time, potential furtherance of the refugee crisis and any fresh international political uncertainty might also affect the sector.
Some of the key market determinants:
- A successful second bailout assessment review in early Q2 2017 would improve economic stability and thus increase commercial and investment activity
- The active management of the systemic banks non-performing loans (NPLs) portfolio could lead to successful disposals of large hotel assets to investors
- New arrivals from international renowned hotel operators as a consequence of the limited presence of branded hotels and the increasing demand for luxury hospitality services
- The shortage of available properties to serve the need for hotel assets in excess of 150 rooms could continue to support the new development trend of boutique hotels
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