PwC: Greek Hotels Up for Sale but No Signs of Interest

The Greek hospitality investment market seems to be in hibernation with at least 225 hotels currently on offer but no signs of interest from potential buyers, a PwC report found.

According to PwC’s “Hospitality Investment Strategies in Greece” report released this week, despite the current offer of 225 hotels, many at main destinations with asking prices almost 50 percent higher than the imputed equity values per bed, very few transactions are completed every year. And this in spite of being a major world tourist destination with over 25 million arrivals.

The study, which examined 785 hotel businesses with annual revenue of over one million euros in any year from 2008 to 2013, found that overall and despite the crisis, the Greek hotel industry remains competitive with 38 percent of the hotels reporting systematic growth, profitability and limited loan-taking.

The report further reveals that the country’s hospitality industry is for the most part fragmented and operating mainly through small, lower category units. Indicatively, of 9,745 hotels only 17 percent belong to the 4- or 5-star category, and only 307 offer more than 300 beds.

Furthermore, hotel units are also unevenly distributed across Greece, with the country’s five major destinations hosting 84 percent of the total capacity and collecting approximately 93 percent of turnover and profits.

In the meantime, there are 87 Greek-owned hotel chains and six of foreign interests, which are on average as competitive as individually-run accommodation units.

“Tourism is the most dynamic sector in the Greek economy and largely not driven by the Greek GDP. Fragmentation has not allowed the creation of large property and hotel management chains. On the other hand, the good economic situation of hotel companies is reflected in high relative valuations, but low absolute size. The overall effect of all these factors is limited transactions each year and very few large transactions with international investors. The market for hotel company mergers and acquisitions in Greece is almost defunct,” Executive Director of PwC Greece Costas Mitropoulos said.

According to the report, the factors determining hotel units’ economic performance are: destination, which in turn affects room rates, average occupancy rate and the capital cost of the given geographical area; category in terms of stars, which determines average room rates and the capital required for the initial investment; unit size, which affects the operating costs and revenues; and the effectiveness of administration, which affects competitiveness.