Foreign funds eye investments in local tourism business sector

By Stathis Kousounis

Foreign funds are increasingly eager to enter the Greek tourism business market, having already proceeded with the acquisition of hotel units and with more expected to follow.

The first such move came from US fund Oaktree Capital Management, which struck a strategic partnership with hotel chain SANI to acquire Oceania Club Hotel and then bought Gerakina Beach Hotel in Halkidiki from National Bank. Another US fund, Hines, has been in advanced talks with Technical Olympic for the buyout of the Porto Karras resort, also in Halkidiki in northern Greece.

Jermyn Street Real Estate Fund, the preferred bidder for Astir Palace Resort at Vouliagmeni, south of Athens, is expecting the completion of the ale, while another fund, London-based Europa Capital has been waiting for over seven years for the end of the licensing process in order to invest some 1.5 billion euros at Atalanti, central Greece, through the Lokros venture.

Meanwhile, the Grace Hotels chain of the Libra group is planning to operate two brand-new hotel units in Greece from 2017. They will be Grace Kalamata, some 20 kilometers to the west of Kalamata in the southwestern Peloponnese, and Grace Kea, on the Cycladic island.

Hotel market representatives say that in most cases the funds negotiate on prices amounting to 10 times the earnings before interest, tax, depreciation and amortization (EBITDA) of the corporations. Hoteliers, especially in the last year when tourism has been on a rise, are said to be asking 20 or 30 times the EBITDA, resulting in the reduction of chances for many transactions.

Another element making investors more reluctant to agree to buy at high prices is the fact that the new investment incentives law on projects at popular destinations with demand for hotels, such as Crete and the Dodecanese, has reduced the subsidy rate for such investments compared with the previous status. This means that the investment buyers will need to implement after the transaction will entail a greater cost.