Tourism real estate has started to reemerge. ere are already investments of over 8 billion euros already moving ahead. 250 project plans budgeted at 900 million euros have already been submitted to the economy ministry, while a series of projects budgeted at 3.2 billion euros are in the pipeline waiting to get the green light to proceed.
Tourism real estate Investors lurking in the shadows of the seven-year recession and debt crisis which have plagued Greece since the start of the decade, have started to reemerge over the course of the past few years. All of a sudden, investment projects worth billions of euros which were stalled for a number of years, have been put forth again, as investors have been encouraged, not by the country’s business-friendly environment (it’s still far from it), but from the rise in tourist arrivals and the prospect of an underdeveloped and thus potentially very lucrative tourism market in the South of Europe.
As a result, over the next few years, in the tourism real estate pipeline there are already investments of over 8 billion euros already moving ahead. Those are expected to cement the sector as one of the Greek economy’s key drivers moving forward.
Specifically, 250 project plans budgeted at 900 million euros have already been submitted to the economy ministry while a series of projects budgeted at 3.2 billion euros are in the pipeline waiting to get the green light to proceed, upgrading in the meantime, the country’s tourist product.
195 investment plans submitted
Indicatively, in this year alone, more than 195 investment plans have been submitted to the tourism ministry, 125 of which concern hotels, one tourist resort, ve conference centers, two golf courses, 10 ski resorts, three theme parks, 24 hot spring facilities and 25 mountain resorts.
Full scale resorts, including not only five-star hotels, but also holiday homes, golf courses and usually a marina are at the epicenter of this real estate boom, as they offer the biggest returns on investment and the potential to significantly lengthen the segment’s operations, from a period of 5 months running from May until October, to almost a 12-month business, which is the main target at this stage. Dozens of such investments have been in various stages of planning and once zoning and building licenses are sorted, they are expected to begin construction.
One of the “oldest” such investments, running for more than two decades now, concerns Minoan Group’s “Itanos Gaia” resort, in the Southeast of Crete. Just recently though, things seem to be getting back on track and the 268 mil- lion euros project is finally closer to securing the necessary licenses.
Christopher Egleton, Minoan Chairman, said in the recent shareholders’ meeting that “following the dismissal of the Ap-
peals against the Presidential Decree granting Outline Planning Consent for its Project in Crete, the Group is about to enter the most rewarding period in its history.” According to Egleton, Minoan now has an un-appealable project and as such, the Group is now in position to move towards the completion of a number of ongoing negotiations with potential partners and investors. With a build foot- print of less than 0.5% and more than 90% of the landscape being left in its natural state, the Group intends to en- sure that Itanos Gaia will be one of the “softest”, most environmentally friendly major projects in Europe and a landmark for tourism in Greece. The site comprises around 6,000 acres (24,000 stremmata). and is set on a peninsula. The areas for development within the site, with out- line consent for 108,000 square metres, are spread over approximately 2,000 acres (more than 8,000 stremmata).
Also in Crete, in Agios Nikolaos, Rus- sian investors under the name Mirum Hellas are planning the development of Elounds Hills, an investment of more than 400 million euros. It will involve, among other things, three 5-star hotels, 380 houses and a marina. The project received approval for fast track treatment last month. The above will be developed in an area of 207 acres (840 stremmata). it’s worth noting that the land has been acquired during the 2007-2009 period. Since then, the investors have had to wait patiently while the necessary paperwork was being “pushed through” the Greek planning system...
In this year alone, more than 195 investment plans have been submitted to the tourism ministry, 125 of which concern hotels, one tourist resort, ve conference centers, two golf courses, 10 ski resorts, three theme parks, 24 hot spring facilities and 25 mountain resorts
By far the biggest project and more long term project is the one under planning in the area of Atalanti, in the Fthiotida region, worth about 1.3 billion euros. Recently, the Ministries of Tourism and Environment approved the Environmental Impact Study for the project, which is being developed in an area of 12,351 stremmata by Locros SA.
The next step involves the issuance of Presidential Decree, which then has to be approved by the Council of State. The project involves the gradual devel- opment of three separate resorts with a total capacity of 8,872 beds. They will be named “Notos”, “Zefyros” and “Vor- ras”. Each one will have its own golf course (18-hole). Atalanti Hills will also have spa, sports centers, an adventure theme park for children and other com- mercial and recreational facilities. The project will also involve thousands of second homes which will be sold or leased.
Kilada Hills is another high-end tour- ism resort, which is edging closer to the start of its development. Representing an investment value of about 418 million euros, the project, undertaken by Dolphin Capital Investors, recently achieved planning permission from the Ministry of Culture, which set the various construction parameters. The development is thought to be a complex one, due to the archeological ndings which are estimated to be in the building site. In any case, Dolphin is looking to develop a resort which will include a luxury hotel under the brand Chedi and a golf-course in an area of 190 acres. It will be complemented by 320 mansions, 100 villas and 28 houses, in what will shape up to become a destination for very wealthy individuals.
Three of Greece’s best-known luxury hotels have changed hands since 2014, despite the country’s continuing recession. All were acquired by foreign investors, suggesting that confidence in the tourism sector’s capacity to attract high-end visitors is recovering. Several hundred tourist hotels on popular islands are also up for sale, but comparatively few deals have been completed. While operating margins have improved, problems remain with resolving non-performing loans owed to Greek banks. However, the hotel sector has remained resilient during the crisis, with increasing numbers of foreign tourists o setting a decline in domestic demand. As a result average occupancy rates have increased by almost 20 per cent over the past six years.
The sale of the Astir Palace resort in Vouliagmeni to a Turkish- Gulf investment fund in 2016 marked a watershed moment for Greek tourism. It was not only the largest privatisation to date of a tourist property in Greece, but the rest sale of a major hotel complex to Middle East investors.
Jermyn Street Real Estate Fund, repre- senting investors from Turkey’s Dogus group, the Abu Dhabi and Kuwait sover- eign investment funds, and several pri- vate Gulf investors, paid Euro400m for a 90 per cent stake in the Astir complex, which includes three hotels and a marina. The resort was owned by National Bank of Greece and Taiped, the Greek privatisation agency.
Dogus teamed up this year with Greece’s Temes group, owner of the luxury Costa Navarino golf resort in southern Greece, to buy the Athens Hilton from Ionian Hotels, a subsidiary of Greece’s Alpha Bank, for Euro76.1m. Like other Greek banks, Alpha was required to sell off non-core assets under the terms of the country’s current international bailout.
The Makedonia Palace, a landmark luxury hotel in the centre of the northern city of Thessaloniki was acquired in 2014 by Ivan Savvidis, a Greek-Russian investor, on a 30-year lease. The Euro51m deal included a commitment to spend Euro5m within two years on refurbishing the property.
Mr Savvidis also acquired a 99-year lease on the Xenia hotel at Paliouri in the Halkidiki region for Euro14m. The hotel is set in a 300-acre estate to be developed as a four-star tourist resort.
Until now Russian investors have focused mainly on Halkidiki, the most popular Greek destination for Russian tourists. But a new project in the Ionian islands in western Greece has recently been “fast-tracked’ by Greek authorities, in a process aimed at accelerating permitting for priority investments. A 120-bed luxury hotel is to be built on the private island of Scorpios, once owned by Aristotle Onassis. The island was leased for 99 years in 2013 to Ekaterina Rybolovleva, the daughter of Russian billionaire Dmitry Rybolovlev, for Euro100m.
Attracting investors from Russia and the Gulf states prepared to refurbish and build high-end hotel accommodation is seen as Greece’s best bet for upgradingatourismsectordominated by family-owned four-star hotels that mostly attract package holiday visitors from western Europe.
Spending on accommodation stable
Visitor numbers have grown significantly during the Greek crisis, from 16.9m in 2012 to 28m in 2017. Spending by tourists accounted for 7.5 per cent of gross domestic product in 2016, while hotel accommodation contributed another 3.5 per cent of GDP. This year, first-half gures from the central bank look encouraging: tourist spend- ing increased 7.1 per cent in the first six months, compared to a 7.9 per cent decline in the same period of 2016.
Yet despite the recent sharp increase in numbers, the tourist quality mix, in terms of spending on accommodation has remained stable over the last 10 years at around Euro70 a day, according
Attracting investors from Russia and the Gulf states prepared to refurbish and build high-end hotel accommodation is seen as Greece’s best bet for upgrading a tourism sector dominated by family- owned four-star hotels that mostly attract package holiday visitors from western Europe
to a new study by National Bank of Greece researchers. A survey of 200 hotels over the period 2008-2016 also showed that the share of high-income tourists has fallen from 27 per cent to 23 per cent of foreign visitors.
One reason for this decline is that the share of arrivals from lower-income countries in southeastern Europe has increased from 4 per cent to 11 per cent over the past decade, thanks to rising incomes in the region and improved road links with Greece.
Greek hotels have proved resilient during the crisis, remaining competitive with the country’s main competitors: Italy, Spain, Portugal, Cyprus, Croatia and Turkey. The number of beds increased by 10 per cent between 2008 and 2016 with more than 80 cent in four and five-star hotels. Employment rose by 7 per cent, compared to a decline of 23 per cent for the rest of the business sector.
Greek hotels benefited from a sharp increase in online bookings by individual travellers, which doubled between 2008 and 2016, according to the NBG study. Such bookings are more profitable with overnight spending 8 per cent higher on average compared with those from travel agencies.
Package holidays declined
Over the same period, the share of package holidays, while still high, declined from 75 per cent to 55 per cent of overnight stays. The average pack- age stay lasts 10 days compared to 3 days for individual travellers, yet hotel occupancy rates in the summer season have increased from 43 per cent to 53 per cent since 2013.
But intense seasonality remains a critical issue for Greek hotels with more than 75 per cent of stays by foreign tourists taking place between June and September, compared to 60 per cent for competitors elsewhere in the Medi- terranean. The Greek islands, which account for 75 per cent of foreign tourist stays, are even worse hit with more than 80 per cent of visitors arriving during the four-month summer period.
As a result, Greek hotels raise prices sharply in high season, charging rates 12 per cent higher than their Mediter- ranean competitors in July and August (but 15 per cent lower in June and September). Hotels in Greece remain open for an average of five months, compared to seven months for competitors.
The study concludes that Greece could increase tourism receipts by 40 per cent, equivalent to Euro5bn yearly, half which would accrue to hotels. But it would take annual investment of Euro1.2bn to achieve this target over the next ve years following a precipitous decline during the crisis, from Euro2bn in 2010 to Euro0.8bn in 2015.