The limited positive news in the hotel market from 2009 & 2010, investors looking for the “light at the end of the tunnel” are seeing it, in capitalization rates, for their 2011 investment opportunities in Greece. Accordingly, unleveraged going-in and terminal capitalization rates increased to range from 9 percent to 11 percent. Hotel yield/cap rates have increased approximately 2-3 points since the recession began in December 2008. There is a large amount of inventory available for sale, including many distressed properties. With motivated sellers of these distressed properties, prices should experience downward pressure, and this could raise the yield/cap rates again before rates stabilize. With the growing number of distressed hotel properties, there should be some fantastic opportunities in the next 6 to 12 months, for those investors with cash in hand or financing options available.
The unleveraged cap rates for the hotel sector continue to increase based on a location/area, and any stabilization we see in the market is tenuous, at best. According to the International Real Estate Federation FIABCI Greece President Mr. Mike Vassiliou, “The Greek Hotel market sector has a lot to work through. The continued risks associated with last year’s declines in occupancy rate, the average daily rate (ADR), and revenue per available room (RevPAR) cause many investors to pause. SETE (Association of Greek Tourism Enterprises) reported a 2010-Q2 change in RevPAR for Greek hotels of -0.6% with the ytd Q2 change at -3.6%. Any additional shock to the economy, including a resumption of demonstrations, labor strikes and/or higher gasoline prices, is likely to negatively affect the travel and tourism market even more,” he explained.
Hotel occupancy rates fell 7.51% in January this year, according to the Athens-Attica Hoteliers’ Association. The association said 2* and 3* hotels suffered the heaviest percentage declines (14.9%), while four-star hotels’ occupancy rates fell only 1.8% compared with the same month last year. Luxury hotels, however, managed to improve their performance with a 3.80% increase in occupancy rates in the first month of 2011.
Meanwhile, Greece's tourism enterprises are receiving optimistic messages from international markets with all estimates converging towards a double-digit growth rate in tourist arrivals in the country this year. Andreas Andreadis, president of the Panhellenic Hoteliers Association, in comments made to Bloomberg, stressed that tourist arrivals would reach 10% in 2011, as turmoil in the Mediterranean basin would benefit the country. Andreadis said UK pre-reservations were up 10% so far, while German pre-reservations were 5.0% higher. He noted that Russian arrivals could reach 20% this year.
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