Greek Hotel Due Diligence & Restructuring
170 rooms | 3* superior beachfront hotel | € 9 million
Navigator advised on the vendor due diligence and restructuring planning of a 170-room, seafront hotel on a Greek island. Set on 30,000 square meters of land, the Greek hotel includes a mix of rooms, suites and bungalows with a private sandy beach of 100 meters.
The hotel is located 1 hour from Athens and features extensive infrastructure, including secure parking, tennis and basketball courts, mini-golf, a small spa, outdoor swimming pools, pool bar and beach bar, 2 animation centres, a fitness room and other amenities.
Like many Greek hotels, this hotel has been affected by a number of operating and structural factors which have affected its profitability:
Seasonality is highly pronounced. The real season lasts from mid-April to early October. In the low season, arrivals fall and the tourism product is limited.
The current revenue split is between tour operators and high street travel agencies; OTAs and some direct bookings. Not enough work has been done to optimise the sales mix and attract a higher share of direct bookings and events. The sales effort and branding are undifferentiated and not enough resources have been invested here. High working capital is needed to deal with long credit terms demanded by tour operators.
Although in good condition generally, the hotel has not been adequately renovated to keep up with current standards.
Navigator’s hotel due diligence and restructuring plan was based on the following elements:
Extensive renovation and hotel facility upgrades to reduce the overall room count by converting rooms into suites and creating a unique hotel product. This will upgrade the hotel by one star and create the most modern, renovated hotel product on the Greek Island.
Strategic focus on families with children and elder couples. Differentiation by creating a “Children’s Village” and providing a major upgrade to the food and beverage offer. This involves recruitment of a new Head Chef and expansion of the F&B Team, with imaginative and high quality food tasting events once per week.
Upgrading the guest activities on the hotel property. Expansion of water sports and other activities such as archery and 5-side football, trekking and cycling which lend themselves to the unique cultural and nature of Evia Island.
Improvement of retail opportunities within the hotel property. Provision of airport transfers and other guest services designed to improve convenience and use of time.
Expansion of meetings, incentives, conferences and events, relying on the unique location of the property only 1 hour from central Athens.
Investment in a state-of-the-art marketing and sales system and guest relations platform. This improves understanding of guest activities and segmentation and improves occupancy, operating returns and marketing ROI. This is accompanied by a significant expansion in marketing and sales expenditure.
This plan raises occupancy (on a 10-year basis, assuming a 7-month season) to above 87%, and EBITDA to 40% by 2024 and provides a 10-year project IRR of 13%. This includes an exit valuation of the hotel at approximately 132% the capital expenditure cost of the investment by 2024, or a 3.2% per year appreciation rate. This is a highly conservative assumption given the present low property values in Greece, and the tourism rebound which is currently underway.
This project brings our vendor due diligence, financial planning and restructuring experience in the hotel sector to over 40 projects since 1995.
For further information on hotel investments in Greece, please contact us.