ECONOMY

Greek hoteliers seek liquidity injection

greek-hoteliers-seek-liquidity-injection

Slammed by the pandemic, the Greek hotel industry is at a critical turning point. In an interview with Kathimerini, the president of the Hellenic Chamber of Hotels (HCH), Alexandros Vassilikos, points out that the sector needs a strong liquidity injection.

As he notes, indicating the extent of the problem, the occupancy of hotels in the whole of the third quarter of 2020 came to less than that of the month of September 2019 alone. Regarding 2021, Vassilikos estimates that it is very difficult to make any predictions with so many uncertainties and so many unknown factors.

However, he also notes that the problems faced by hotels since the onset of the pandemic are not due to mistakes in their business decisions but rather have been imposed by conditions that could be compared to those in natural disasters, and therefore should be treated as such.

What does the latest research of the Institute for Tourism Research and Forecasts (ITEP) on behalf of the HCH reveal about the effects of the pandemic on the hotel industry in 2020?

Greek hotels are on the edge. Their turnover has been in free fall, from 8.4 billion euros in 2019 to €1.8 billion in 2020. And 15.2% of that turnover remains uncollected – we are talking about €278.4 million. At the same time, there has been an 83% reduction in advance payments for 2021, which translates into €620 million. Thus, in addition to the operating loss, there is a €900 million liquidity deficit. The ITEP survey fully and accurately demonstrates that 2020 was a year of great losses and that in order for the industry to remain strong and be able to continue its contribution to society and the economy, it needs a large injection of liquidity. That increase of liquidity is the oxygen that will allow hotels to breathe, after this plunge, which is unprecedented in the 70 years of Greek tourism.

When the pandemic started, almost a year ago, did you expect such negative results or did they surprise you too?

No, they did not surprise us at all. ITEP has been conducting surveys on behalf of the HCH throughout this period, from the first lockdown until last December. That is how, last April, we were able to understand the extent of the problem in time and sound the alarm – taking the risk of appearing pessimistic. As things turned out, not only did our research approach not dramatize what was coming, but it was also moderate compared to the actual impact suffered by the industry, now reflected to its full extent. Suffice to say that hotel occupancy in July-September 2020 came to less than that of September 2019. This figure alone reveals the extent of the problem. Keep in mind that the hotel product has a daily expiration date. It is not stored or stocked, nor can it be put on offer at a later date, as are products from other industries. For hotels, what is lost is lost permanently. As was the case with the winter holiday season in mountain destinations, as is the case with hotels that are open year-round experiencing an extremely difficult winter. This is another interesting element of our research, as, out of the 3,965 operational hotels in the country, only 59% of them reopened after the first lockdown – i.e. 2,328 – and 63% of them were forced to close again. At the end of 2020, only 863 year-round hotels remained open, representing 22% of the total.

Will 2021 be able to offset the losses of 2020?

Metaphorically speaking, 2020 is still here and, as everything suggests, this unpleasant “extension” will last through the first half of 2021. Therefore, it is very difficult to make any predictions when the uncertainties remain so high and the unknown factors are still so many. A third wave of the pandemic, virus mutations and delays in vaccination programs in all EU countries are creating a quicksand-like environment. We can only keep working to create the conditions for a tourism recovery and hope that we will finally be able to have an improved season in 2021 compared to 2020, but there will certainly be no comparison with the performance of 2019.

What are the conditions for the recovery of Greek tourism?

The priority is to keep the country’s hotel network alive in order to become a driver for the recovery not only of tourism but also of the Greek economy as a whole, as soon as conditions allow for it. This in the short term means supporting hotels by immediately boosting their liquidity. In the longer term, it means a 10-year plan and its implementation. A plan that will take into account the priorities of the European Recovery Fund, which will shape the new financial instruments from 2021 and the years to come. The Hellenic Chamber of Hotels is completing four studies concerning energy behavior and management, technological infiltration and digital reform, accessibility and the reskilling and upskilling of human resources. These are issues that are at the forefront today as the pandemic is acting as a catalyst and accelerating the need to respond to pre-existing trends.

Do your suggestions receive positive responses?

There has definitely been a response and the tools to help, such as the repayable advances. However, as our research showed, the funds allocated through all financial instruments on average covered only 33% of hotels’ cash flow needs. We therefore need more money and an adjustment of funding combinations that favor financing, not loans. The problems faced by hotels are not due to mistakes in their business decisions but rather have been imposed by conditions that could be compared to those in natural disasters, and therefore should be treated as such. In addition, the challenge of survival and recovery doesn’t only concern the hotel sector; it concerns almost the entire real economy, as, on average, during 2017-19, hotels invested €1 billion in renovations and repairs alone every year. In 2020, the survey estimates that we were about €750 million short, which some entire sectors don’t make in a year, and this will have a negative multiplier effect on the market and the economy.