ECONOMY

Mismanagement and excessive debts burden hotel enterprises

mismanagement-and-excessive-debts-burden-hotel-enterprises

Much as tourism has been growing to record levels in recent years in Greece, hotel enterprises are not meeting their obligations to banks, a phenomenon that experts attribute to a combination of factors.

Compared to 2009, an additional 11 million people visited Greece in 2015, up by 73 percent, while tourists spent an extra 4.1 billion euros, or 39 percent. These are impressive figures, given that gross domestic product contracted by over 25 percent in the same period.

However, despite the strong growth in revenues, the sector’s performance has been poor by comparison: In 2013 – a record year for tourism at the time – the hotel sector posted losses, while in 2014 pretax profits amounted to just 150 million euros.

Furthermore, a resounding 40 percent of the loans hotel enterprises have received from banks is not being serviced. Bank officials have told Kathimerini that hotel owners have received a total of 7 billion euros, of which 2.8 billion concerns nonperforming loans.

In response to that paradox, analysts say that one would have expected a far better performance, at a time of record tourism arrivals, given also that a large part of the infrastructure has been financed by state subsidies. They add that the negative picture of the sector is attributed to a number of reasons, which include mismanagement, the overcharging of units, unorthodox practices to avoid showing any profits (and paying additional taxes), and the significant drop in domestic tourism.

This picture reflects to a great extent the country’s general problem when it comes to competitiveness, whereby even sectors where Greece has a competitive edge are unable to yield any significant returns due to inefficient management, excessive loans etc. It is no coincidence that other sectors where Greece also has an advantage, such as fish farming, are also sinking under the weight of excessive borrowing and mismanagement.

Tourism professionals say that although there certainly are cases of poor management and other bad practices, the problem of overindebtness and high losses mainly concerns a small number of hotel groups, which makes the entire sector look bad.

Out of the country’s 9,700 hotel enterprises, some 30 groups are responsible for more than half the bad loans. They account for 1.8 billion euros of the nonperforming loans – i.e. 65 percent of all NPLs in the sector. Sector professionals stress that without those groups, the bad loans would have had a share of less than 20 percent.