GREEK HOSPITALITY MARKET OVERVIEW€¦ · GREEK HOSPITALITY MARKET OVERVIEW 2016 7. International flight arrivals in 2016 ended on a more positive note than in 2015. Specifically,

MARKET OVERVIEWGREEK HOSPITALITY

2016

A successful assessment review of the economic adjustment programme in the beginning of Q2 2017 would improve economic stability and could lead to a further stabilisation of the domestic banking system 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 and portfolios to investors, who are looking to follow a more hands-on approach.

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 arrival of Four Seasons to manage the (currently under extensive renovation) Astir Palace Hotel in Vouliagmeni could be regarded as a sign of the upcoming market development.

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 with capacity of less than 50 rooms.

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.

MARKET OUTLOOK 2017

Main market determinants for the year ahead

GREEK HOSPITALITY MARKET OVERVIEW 2016

1

CONTENTS

MARKET SNAPSHOT

HOTEL SUPPLY

ARRIVALS, TURNOVER AND OVERNIGHT STAYS

MARKET PERFORMANCE

INVESTMENT ACTIVITY

LIABILITY DISCLAIMER

CONTACT

03

04

08

12

14

17

18

2

MARKET SNAPSHOT

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 neighbouring 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.) also impacted demand and certain destination choices.

GREEK HOTEL MARKETPREFECTURES

01 Eastern Macedonia & Thrace02 Central Macedonia03 Western Macedonia04 Thessaly05 Epirus06 Ionian Islands07 Central Greece08 Western Greece09 Peloponnese10 Attica11 Crete12 South Aegean13 North Aegean

0102

03

05 04

08

0607

10

09

11

13

12


3

HOTEL SUPPLY

GREEK HOTEL MARKET - AVAILABLE STOCK & CAPACITY IN 4* - 5* HOTELS

Source: Hellenic Chamber of Hoteliers – Edit: ARBITRAGE RE

Investment activity in the Greek hotel market in 2016 was mainly focused on 4* and 5* hotels, following the trend during the past two years, which is anticipated to continue in 2017. According to the Hellenic Chamber of Hoteliers, during 2016 the available stock of 4* and 5* hotels in Greece was increased by 14 and 40 hotels respectively, which amounted for each star rating category to an increase of 3.5% and 3%.

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 boutique1 hotels. As a result of the general trend in Europe, there was an increased demand in the last

five years for small sized luxury hotel development of unique architecture. The identified trend led to an increase of the boutique hotels’ share in the domestic hotel market. Growth prospects for this hotel segment remains positive through the development of new facilities and the upgrade of existing stock.

PREFECTUREHOTELS

AvailableStock 5

YOY HOTEL CHANGE(2016 - 2015) ROOMS

Eastern Macedonia & Thrace

Attica

North Aegean

Western Greece

Western Macedonia

Epirus

Thessaly

Ionian Islands

Central Macedonia

Crete

South Aegean

Peloponnese

Central Greece

Total

383

645

391

267

125

393

570

926

1,188

1,549

2,087

651

532

9,706

10,884

31,295

11,720

9,609

2,830

8,054

14,737

47,518

44,368

88,062

100,220

19,431

15,064

413,792

951

6,255

784

1,111

61

711

1,316

4,027

6,756

17,808

17,390

2,809

666

60,981

1,865

7,811

1,570

2,014

398

1,334

2,878

10,237

8,076

24,437

34,206

3,714

2,611

101,214

10

30

6

4

3

9

28

25

41

88

121

20

10

395

27

98

32

37

17

75

106

101

90

236

353

105

37

1,314

10%

3%

0%

0%

0%

10%

0%

4%

9%

3%

2%

5%

0%

4%

4%

0%

5%

0%

9%

1%

9%

3%

4%

-1%

3%

0%

4 AvailableStock 5 45 4

1. High-end boutique hotels in Greece, especially in Cyclades, usually have a small number of rooms, 10-50, adopt a guest centred approach and try to offer a customised experience by sophisticating and personalizing their service.

4

30,000

25,000

20,000

15,000

10,000

5,000

0

5

4

3

2

1

Easte

rn M

acedon

ia& Th

race Attic

aNor

th A

egea

nW

este

rn G

reec

eW

este

rn M

acedon

ia

Epiru

s

Thes

saly

Ionia

n Isla

nds

Centra

l Mace

donia

Crete

Sout

h Aeg

ean

Pelop

onne

seCen

tral G

reec

e

Hotel Stock

Hotel Stock 4*-5*


Ro

om

s


350

300

250

200

150

100

50

0

5

4

Easte

rn M

aced

onia

& Thra

ce

Attica

North

Aeg

ean

Wes

tern

Gre

ece

Wes

tern

Mac

edon

ia

Epiru

sTh

essa

lyIo

nian

Island

s

Centra

l Mac

edon

ia

Crete

Sout

h Aeg

ean

Pelop

onne

seCen

tral G

reec

e

CAPESOUNIO


5

In wider Athens region, investors’ interest for 4* and 5* hotels followed the national trend. More specifically, the increase in tourist arrivals in Athens triggered the interest of hoteliers, domestic and non-domestic, for the renovation, acquisition and development of more luxury hotels. New Hotels that started operating were 5* Wyndham Grand located in Karaiskaki Square, 5* Electra Metropolis in Mitropoleos Street,

4* Tiare Hotel close to Omonia square and 4* MET34 Hotel in Syntagma. Athens’s hotel stock was also enriched with small sized facilities such as 4* Zillers Boutique Hotel in Mitropoleos Square, the Pi Athens Suites close to Panathenaic Stadium, in[n] Hotel in Syntagma and 5* Somewhere Boutique Hotel in Vouliagmeni.

REGIONAL UNITHOTELS

AvailableStock 5

ROOMS

East Attica

North Athens

West Attica

West Athens

Central Athens

Attica Islands

South Athens

Piraeus

Total

78

28

14

11

225

204

47

42

649

2,141

178

336

0

4,191

479

785

23

8,133

9

4

0

0

15

3

1

1

33

19

5

2

0

42

23

11

1

103

5,944

1,084

683

356

14,696

4,368

2,658

1,650

31,439

1,690

253

0

0

3,888

85

374

77

6,367

4 AvailableStock 5 4

ATTICA HOTEL MARKET AVAILABLE STOCK & CAPACITY IN 4* - 5* HOTELS


6

90

80

70

60

50

40

30

20

10

0

East Attica

North Athens

West Attica

West Athens

Central Athens

Attica Islands

South Athens

Piraeus

Attica Hotel Market in Stars

VOULIAGMENIASTIR PALACE

Following the trend, we believe that due to a number of pending acquisition and reopening negotiations that investment activity will keep its growing pace in Athens and the suburbs. This trend will be supported by the recent sales and forthcoming renovations of 5* Astir Palace in Vouliagmeni and the central 5* Hilton hotel in Vassilisis Sofias, which have or will attract added-value interest from High End Operators.

Hotel Stock in Attica


Ho

tels

REGIONAL UNIT


7

International flight arrivals in 2016 ended on a more positive note than in 2015. Specifically, arrivals increased by approximately 9.0%, exceeding 16.5 million passengers, 1.3 million more than 2015. A downward trend in international flight arrivals was recorded only in the islands of Kos, Samos and Lesbos, which can be attributed to the impact of immigrant and refugee influx.

ARRIVALS, TURNOVER & OVERNIGHT STAYS

ARRIVALS

International Arrivals - Main Airports

Source: Greek Tourism Confederation – Edit: ARBITRAGE RE

Tra

velle

rs

YOY

Cha

nge

3,500,000

3,000,000

2,500,000

2,000,000

1,500,000

1,000,000

500,000

0

30%

25%

20%

15%

10%

5%

0%

International Arrivals 2015 International Arrivals 2016 YOY Change (2016/2015)

Janu

ary

Febr

uary

Mar

ch

April

May

June July

Augus

tSe

ptem

ber

Oct

ober

Novem

ber

Decem

ber

8

700,000

600,000

500,000

400,000

300,000

200,000

100,000

0

20%

15%

10%

5%

0%

-5%

International Arrivals 2015 International Arrivals 2016 YOY Change (2016/2015)

Janu

ary

Febr

uary

Mar

ch

April

May

June July

Augus

tSe

ptem

ber

Oct

ober

Novem

ber

Decem

ber

Further increase is expected in international flight arrivals from the more efficient operation and infrastructure upgrades in 14 regional airports formerly managed by the Greek state and located in major tourist destinations, whose ownership and operations were recently passed under a 40 year concession to an international consortium led by Fraport and Slentel.

LAGONISSIGRAND RESORT

International Arrivals - Athens International Airport

Source: Greek Tourism Confederation – Edit: ARBITRAGE RE

Tra

velle

rs

YOY

Cha

nge

Athens International Airport recorded an increase of over 9.00% in international flight arrivals compared to 2015.


9

25

20

15

10

5

0

16

14

12

10

8

6

4

2

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Receipts

Tourist Arrivals

The positive trends in tourism were reflected in turnover and tourist arrival figures from 2012 to 2015. Total tourist arrivals in 2015 exceeded 23.5 million, while in 2014 amounted to approximately 22 million. The proceeds in 2015 also recorded an increase albeit marginal compared to 2014 figures. They amounted to € 14 billion whereas in the previous year reached € 13.5 billion.

Despite the c.5% increase in the average overnight (stay) expenditure of international visitors, first time in 7 years, the average expenditure per trip decreased due to a decrease in overnight stays per trip. According to data published by the Bank of Greece, inbound tourism revenues in 2016 amounted to € 13.2 billion, a decline of 6.4% compared to 2015.

The reported losses in revenues were largely due to the weaker tourism demand in East Aegean islands (e.g. Kos, Lesvos, Chios, Samos etc.) as a result of the continuing refugee inflows and also due to the economic impact of the British referendum result, which led to less UK visitors. Furthermore, the latest changes in the hospitality industry VAT regime may have also played a role in the competitiveness of the offered product. It is true though that the reported losses were partly offset by the increase in international visitor arrivals since many tourists favoured Greece over neighbouring competing markets in the wider region due to their political and social situation.

TURNOVER & OVERNIGHT STAYS

Tourist Arrivals & Receipts

Source: Bank of Greece - Edit: ARBITRAGE RE

in M

illio

n vi

sito

rs

€ in

Bill

ions

10

According to Arbitrage RE analysts, revenues per available room (RevPAR) for 4* and 5* hotels in the country’s main tourist destinations (e.g. Athens, Crete, Chalkidiki, Rhodes, Zakynthos etc.) have followed a balanced course in the last three years ranging from € 18,000 to € 25,000 with a limited number of high end hotels reporting RevPAR in the range of € 30,000 to € 35,000.

In wider Athens region, revenues per available room (RevPAR) increased by 3.00% to 4.00% approximately, compared to the corresponding period in 2015.

HOTELS PERFORMANCE


11

MARKET PERFORMANCE

The growth rate of the Greek tourism market marginally appreciated in 2016, following an upward trend with a relatively lower pace than 2013, 2014 and 2015. More specifically, the aforementioned increase is attributed to the marginal recovery of the market in H2 2016, compared to H1 2016 when there was a decrease in turnover.

These market trends were also reflected in the turnover figures of businesses in accommodation, food and beverage sectors. The turnover index linked to these sectors recorded a decrease of 11.2% in Q1 2016 and 1.3% in Q2 2016 compared to 2015. Furthermore, proceeds in Q3 and Q4 2016 showed an increase of 2.9% and 4.3% respectively, compared to 2015. The average turnover index in F&B and Accommodation sectors recorded a marginal increase of 0.2% in 2016, compared to the previous year.

Based on data and forecasts from the World Travel & Tourism Council (WTTC)2, the long-term effect of tourism in the Greek economy is mainly linked with indirect contributions. It is estimated that indirect contributions to the country’s GDP exceeded € 18.5 billion in 2016, surpassing direct contributions which amounted to over € 13 billion. According to WTTC, the tourism contribution to the Greek GDP during the current year is expected to fall by 2%, with total contributions reaching € 32 billion, amounting to 22.5% of the GDP.

13.7619.40

0 05 10 15 20 25 30

2026

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015 13.3019.20

13.2318.68

14.3120.14

14.8920.91

15.4821.71

16.1022.54

16.7423.41

17.4124.30

18.1125.23

18.8426.20

19.5927.20

Direct ContributionIndirect Contribution

€ in Billions

Turnover Index - F&B and Accommodation

Tourism Contribution

in GDP

Source: Hellenic Statistical Authority – Edit: ARBITRAGE RE

Source: World Travel & Tourism Council - Edit: ARBITRAGE RE

180

160

140

120

100

80

60

40

20

0

2010 2011 2012 2013 2014 2015 2016

Quarters 1o 2o 3o 4o

2. The direct or indirect contributions of tourism to the country’s GDP from 2016 to 2026 are study forecasts.

12

According to analysis by WTTC, there will be a long term increase in capital investments in tourism as well as in businesses operating in the related food & beverage, transportation and logistics sectors. It is anticipated that capital investments will increase annually by 4% on average until 2026. The analysis also shows that a major factor affecting the hotel market relates to revenues from international visitors. This market indicator has seen an increase in recent years and according to long term forecasts its upward trend is expected to continue in the coming years and exceed € 23 billion by 2026.

Considering this outlook, an increase in inbound tourism revenues is anticipated to trigger an inflow of foreign capital in the sector. We anticipate this to result in an increased demand for property assets suitable to accommodate hospitality operations and related services.

Annual Tourist Expenditure

Source: World Travel & Tourism Council - Edit: ARBITRAGE RE

CHALKIDIKISANI RESORT

€25,000,000,000

€20,000,000,000

€15,000,000,000

€10,000,000,000

€5,000,000,000

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026


13

INVESTMENT ACTIVITYDuring 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.

The completed transactions including new hotel management and operational contracts indicated the interest for luxury and high specifications hotels, predominantly of 4* or 5* rating. A notable transaction was the acquisition of 3 hotels, 2 in Corfu and 1 in Kos, from the hotel group SANI – IKOS. The acquired hotels would be renovated and operated under a new brand, Ikos Resorts. The group’s main international investors are GS AM, Hermes GPE and Oaktree CM. In addition, Astir Palace

Beach Resort in Vouliagmeni was sold to Apollo Investment, a subsidiary of Jermyn Street RE Fund IV. Alpha Bank also completed the sale of the central Athens landmark Hilton Hotel to Home Holdings SA, owned by TEMES SA and D-Marine Investments Holding BV, a subsidiary of Dogus Holding AS.

At the end of the year, ASTERAS 2020, an investment vehicle owned by Douzoglou family was the preferred bidder to acquire Leto Hotel in an auction organized by HRADF and London & Regional Group acquired Amathus Beach Hotel in Rhodes for c.€ 30.5 million, excluding any debt obligations of the previous owner, LANDA S.A., amounting to € 23 million approximately.

Regarding new hotel operations in Athens in 2016, the 4* Athens Tiare hotel in Omonia was launched in August with Mage Hotels & Resorts as managers. At the same time, the 4* Athens Avenue hotel, following the property’s conversion, opened in Syngrou Avenue. The property is owned by

Eurodomus group. Mid-September marked the inauguration of the 5* Electra Metropolis hotel after extensive upgrade works. The building is a well-known landmark building of the Greek capital as it was housing for decades the Ministry of Education.

HOTEL STAR RATING LOCATION BUYER

CLUB MED KEFALOS

CORFU CHANDRIS

DASSIA CHANDRIS

ASTIR PALACE

ATHENS HILTON

LETO

AMANTHUS BEACH

5

5

5

5

5

4

5

KOS

KERKYRA

KERKYRA

VOULIAGMENI

ATHENS

MYKONOS

RHODES

SANI - IKOS

SANI - IKOS

APOLLO INVESTMENT HOLD Co

HOME HOLDINGS SA & D-MARINE INVESTMENTS

ASTERAS 2020

LONDON & REGIONAL

410

410

-

506

25

318

90,000,000

110,000,000

444,000,000

142,000,000

16,900,000

30,550,000

AVAILABLEROOMS

SALE PRICE (€)

HOTEL MARKET - RECENT SALE TRANSACTIONS

Source: ARBITRAGE RE

14

Furthermore, 5* Wyndham Grand Athens, member of the American chain, opened in early December in Karaiskaki Square in early December following also renovation. The property is owned by Viohalco group and it is managed by Zeus International. In 2016, the Saudi Arabian hotel group ‘Somewhere Hotels’ entered the European hotel market through the acquisition and renovation of a 5* boutique hotel in Vouliagmeni, which was subsequently renamed as Somewhere Vouliagmeni, and also the acquisition 4* Eden Beach Resort hotel (to be renamed as Somewhere Eden Beach Resort), located on 47th km of Athens – Sounio Avenue in the area of Anavyssos.

Further important developments in the domestic hotel market was the expansion of Marriott International group in Chania, Crete, through the inclusion of 5* Domes Noruz hotel in Marriott’s Autograph Collection Hotels and also the opening in April 2016 of 5* Radisson Blu hotel (formerly known as Minos Imperial Luxury Beach Resort and Spa) in the area of Milato in Lasithi, which is operated by Carlson Rezidor Hotel Group under a 15 year franchise agreement with Geniataki family, the owners. The hotel stock in Crete was also enhanced with 5* Anemos Luxury Grand Resort, owned by Vontarakis group, in Georgioupoli. In addition, Thomas Cook opened in May 2016 its first hotel, Casa Cook in Rhodes and is expected to expand with a second hotel complex on the island of Kos.

Other notable investments in tourism include the new Thassos Grand Resort hotel complex on the island of Thassos, developed by Luke Lukanov, the Bulgarian entrepreneur, and the luxurious 5 star Mirragio Thermal Spa Resort in the Kanistro region of Kassandra, Chalkidiki. They also include 5* Hydrama Grand Hotel in the city of Drama which started operating after the conversion of a listed property first constructed in 1926 to house the Spirer Tobacco Warehouse. Finally, it is also worth also noting Maris Hotels group investment in Oia Santo Maris Luxury Suites & Spa in the island of Santorini.

ATHENSGRANDE BRETAGNE


15

There were also a series of investments announced in 2016 that will materialise this year. These announcements included the development of a Spa Resort in Mistras from Domotel and the € 50 million hotel development programme by Sani – Ikos, in Chalkidiki. The latter programme includes the development of 136 room Sani Dunes hotel, expected to start operations in late June 2017, the upgrade of Sani Club and the renovation of Ikos Oceania, with a total capacity of 300 rooms.

HOTEL STAR RATING LOCATION INVESTOR - OPERATORAVAILABLEROOMS

TOTALINVESTMENT (€)

METROPOLITAN

WYNDHAM GRAND ATHENS

ELECTRA METROPOLIS

TIARE

DOMES NORUZ

ATHENS AVENUE

CASA COOK

RADISSON BLU

SOMEWHERE VOULIAGMENI

THASSOS GRAND RESORT

MIRRAGIO THERMAL SPA RESORT

HYDRAMA

ANEMOS

OIA SANTO MARIS

5

5

5

4

5

4

5

5

5

5

5

5

5

5

PALAIO FALIRO

ATHENS

ATHENS

ATHENS

CRETE

KALLITHEA

RHODES

CRETE

VOULIAGMENI

THASOS

CHALKIDIKI

DRAMA

CRETE

SANTORINI

CHANDRIS HOTELS

ZEUS INTERNATIONAL

ELECTRA HOTELS GROUP

MAGE HOTELS & RESORTS

LEDRA HOTELS

EURODOMUS

THOMAS COOK

GENIATAKI FAMILY

SOMEWHERE HOTELS

ETON

MED SEA HEALTH

ERGOEPISKEYASTIKI

VANTARAKIS HOTELS

MARIS HOTELS

336

273

216

111

83

94

73

318

11

173

300

73

240

42

15,000,000

5,000,000

17,000,000

-

-

-

-

-

-

15,000,000

120,000,000

15,000,000

20,000,000

-

HOTEL MARKET - NEW HOTELS IN OPERATION

The major investment and commercial activity in the hotel sector is summarised below:

Source: ARBITRAGE RE

16

LIABILITY DISCLAIMERThis report has been prepared for information purposes. Therefore, it should not be construed as advice and no action should be taken based upon any information contained in this document. You should seek independent professional advice from a person or a firm who is licensed and/or knowledgeable in the applicable are before acting upon any information contained in this document.

No other party is entitled to gain access to or rely on this document for any purpose other than the one described above and thus we accept no to any other party who gains access to this document. You should not disclose or refer to this document in any prospectus or other document without our prior written consent.


2017

Arbitrage Real Estate Advisors2 Amfitheas & Syngrou Avenue171 22 Nea Smyrni

Tel: +30 2109403431Fax: +30 2109403781Email: [email protected] Web: www.arbitrage-re.com

Research Contacts:

Ioannis OrfanosAssociate Partner, Head of Asset ManagementEmail: [email protected]

Christos MantzouratosSenior Associate, Valuation & AdvisoryEmail: [email protected]

Dionysis MyronidisAssociate, Valuation & AdvisoryEmail: [email protected]

2

Documents

GREEK HOSPITALITY MARKET OVERVIEW€¦ · GREEK HOSPITALITY MARKET OVERVIEW 2016 7. International flight arrivals in 2016 ended on a more positive note than in 2015. Specifically,