BID AND ASK SPREAD IN THE HOSPITALITY SECTOR – A COVID-19 INTRODUCED ASYMMETRY
The hospitality sector in Greece, a key contributor to the country’s gross domestic output, experienced healthy growth during the years before Covid-19. Landmark infrastructure investments took place including the long overdue completion of five backbone motorways, the upgrade of fourteen regional airports and Athens’ International Airport, the award of concession contracts for marinas and ports and the creation of new piers in key ports of the country.
The hotel industry followed suit with significant investments towards the upper end of the offering. The capacity of five and four star hotel units cumulatively increased by 23% and 12% respectively during 2017-2019, while single digit growth was experienced in the three star offering and a contraction in the lower end of the quality spectrum.
Greece was on an investment path, attracting more interest from international investors as the perception of risk for the country was normalizing, depicted also in record low yields for sovereign debt.
Valuation levels evidenced in transactions in the hospitality sector during the last decade, in terms of multipliers offered applied to the assets’ profitability, were never shy compared to European or Global averages. The sector was considered relatively immune to the sovereign crisis, albeit disposable income contraction had taken its toll to the fundamentals of the businesses, leading to lower valuations as a result of applying the same international multipliers to smaller cash flow generation.
During the three years before Covid-19, the
bid started approaching the ask in transaction lingo. Occupancy rates increased, the offering became more premium, generating better margins, infrastructure investments enhanced expectations for even better future profitability and as a result, the multiplier was applied to a larger number, generating more exit proceeds to sellers. More transactions started taking place.
Then Covid-19 struck and the bid started moving away from the ask again. With air traffic down by in excess of 70%, occupancy rates in their mid twenties and tourist receipts down by almost 80% in 2020, it is easily understood that the fundamentals were massively hit. The expectation for 2021 is not rosy either with vaccination delays shifting hopes for recovery signs towards the second half of the year.
Many M&A discussions were impacted by the deterioration of fundamentals. Buyers sought to take advantage of the situation and pay less, arguably since future cash flows would be less. Sellers took the view that this is a pause and one needs to exclude it from the calculations, demanding pre Covid-19 numbers.
Theory suggests that the value of an asset should be equal to the value of its future cash flows translated in today’s money. So the crucial question is when will we see 2019 fundamentals again. Consensus suggests anything between 2-3 years lag. Buyer’s that accepted the “pause approach” and only demanded time value of money discounts to pre Covid-19 levels for the expected time lag, are the ones that transacted while sellers that accepted a discount since today’s money is not equal to tomorrow’s money, were the ones that attracted bids. Materially less transactions took place during 2020 and the main trades were either distressed sales or the exit of financial institutions from a debt exposure.
So what do we need to do to create the circumstances that bring the bid and the ask back to equilibrium in order to attract investors and create a healthy vendors’ environment.In the history of economic theory, wheel reinvention was never progress. The recipe that worked after the sovereign crisis, with large infrastructure projects contracted to the private sector and continuous upgrade of the hospitality offering towards the upper end of the spectrum will fuel future growth and generate investor demand again. If those two components can be topped up by a stable and solid legislative environment that provides certainty and rarely changes, we can rest assured that the bid will outweigh the ask, transactions will take place at higher prices and Greece will import know how and further enhance the most important product it is known for.
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After completing her Bachelor in Business Administration (Minor in Science and Economy) at the American College of Thessaloniki, she continued with an MBA in Hospitality Marketing at Les Roches School of Hotel Management in Switzerland and a Diploma of Higher Education in International Tourism “The French approach” from the Universite Paris I Pantheon Sorbonne. She has been running the family owned hotel for almost twenty years, initially as an Operations Manager and later on as General Manager and CEO. She has been a member of the Board of Directors in Thessaloniki’s Hotels Association and has participated as a guest speaker in several lectures and seminars such as Yield Managementin Les Roches (Bluche, Switzerland), and Operations Management Principles and Housekeeping Principles in CMH (Paris, France).
Konstantinos Alexopoulos has been a professional in the Greek hospitality industry for two decades with extensive experience in hotel
management, operation and consulting. He is the CEO of Domotel Hotels & Resorts Group, which has a history of more than 15 years in its current form and a heritage in the hospitality sector which began in 1964. Additionally, he holds the position of CEO at DHR Services,
supporting hospitality brands through his extensive know-how in the industry; both positions are reinforced by his ten years of experience in the construction sector in Greece and the Balkans, which furthered his knowledge of local markets. Having completed his Degree as a Civil Engineer at the Aristotle University of Thessaloniki, he continued with a Master in Science in “Construction Economics and Management” in UCL and a Master of Arts in Hospitality Management in Middlesex University. Furthermore, he has attended two complementary training programs in finance and management at the University of Macedonia. He is a member of the Board of Directors of the Greek Tourism Enterprises Confederation (SETE) and the treasurer of the Board of Directors of the Institute of SETE, a member of the Leadership Committee of the Hellenic – American Chamber of Commerce and holds positions in a number of Boards of Directors of other organizations.
Experienced Strategic Marketing & Communications professional with a proven track record of developing successful marketing campaigns & corporate communication plans,, brand building, driving digital transformation and delivering measurable business growth. Her academic background in Economics, Marketing & Digital coupled with 25 years of experience in the services industry in SE Europe, brings a wealth of knowledge and expertise in all customer touch points. As a seasoned marketer, with multidisciplinary corporate background in Banking, Hospitality & Technology, she specialises in developing and executing strategy & comprehensive marketing plans that help companies reach their business goals.
Throughout her career, she has consistently demonstrated a passion for innovation and a commitment to staying ahead of industry trends. Her ability to think both creatively and strategically combined with deep customer-centric knowledge delivers the highest standards of services from startups to listed companies & multinational brands.
Graduating with distinction from National and Kapodistrian University of Athens with a Bachelor’s degree in Economics, Nephelie demonstrated an early passion for numbers and analytical thinking. What sets Nephelie apart is her unwavering commitment to merging her financial skills with technology.
She embarked on a journey into Android development, driven by a curiosity to leverage technology for financial empowerment. Through dedication and hard work, she not only mastered programming languages such as Java and Kotlin but also developed a deep understanding of mobile app development.
Her remarkable accomplishments in Android development were further underscored by the acquisition of four highly competitive scholarships during her academic journey. As a financial analyst with a remarkable track record in Android development, Nephelie embodies the perfect blend of analytical precision and technological innovation. With a history of scholarship recognition and a commitment to pushing the boundaries of what’s possible in every combined field.
Konstantinos studied Economics at the University of Piraeus, and has a finance and accounting professional background with seven years of experience in the industry.
He perfectly deals with financial management and reporting, and handles the financial operations of DHR Services, including budgeting, forecasting, financial analysis, and reporting.
He works closely with the senior management team to develop and implement strategic financial plans to drive growth and profitability.
Helen works in Marketing field for 18y, in multinational companies, handling brands not only in Greece, but also in European countries, like Cyprus and Malta. She was responsible to increase brand awareness, market share and finally sales of many famous brands, which lead to be no1 in their industry.
She handles marketing plans for all 7 properties of Domotel Hotels & Resorts, in online and offline media, aiming to increase brand awareness for target groups not only in Greek market, but abroad as well.
She constantly studies competition, promotes facilities, and provides actions to build strong customer relationships.
In charge of optimizing online presence and distribution and improving the hotels’ online performance of Domotel Hotels and Resorts, Minas is a highly motivated and hardworking professional with more than 20 years of experience in various sectors of the tourism industry specializing in the ecommerce & online media channels.
Creative personality with innovative ideas and a “can do” attitude.
Able to meet deadlines in a professional and timely manner.
Matina has 25 years’ experience in the hospitality industry and has worked in some of the biggest hotel chains in Greece (Grecotel Hotels & Resorts) as well as worldwide chain, (Accor Hotels) in different managerial roles in Reservations, Banquet and Sales in diverse types of hotels (resorts, city and airport hotels).
She has participated in new hotel openings and numerous hospitality events.
Currently, she handles the corporate sales for all 7 properties of Domotel Hotels & Resorts as well as the New Business Development.
She constantly builds relationships with corporate clients and collaborates closely with Reservations, Banquet Department and Senior Management aiming to increase sales and ensure excellent customer service.
With over 16 years of experience in the hospitality industry, Foteini has honed her expertise in revenue management, guest satisfaction, and strategic planning.
Most of her professional journey was dedicated to one of the biggest international hotel chains, Hilton Hotels & Resorts, where she contributed for more than a decade in various capacities.
Part of her current duties is to maximize profitability by defining the pricing strategies and react quickly and decisively to demand patterns.
She participates in every hotel opening, and she is also responsible for the room revenue forecasting and budgeting.
She studied Civil Engineering in the Aristoteles University of Thessaloniki, and then obtained a Master of Science Degree in Earthquake Engineering and Structural Dynamics at Imperial College of Science & Medicine in London.
Fifteen years ago, she was the co-founder of PMA Engineering, a new design company in Greece. She was responsible for the quality assessment and management of the company, the staff training and appraisal, as well as the implementation and management of ISO 9001: 2008.
She moved to the field of HR, driven by her passion to work with people and helping them reach their full potential. During her career in Domotel Hotels & Resorts, she introduced a data-driven and analytical approach to HR strategy and implemented an innovative training and development programs to help employees grow and thrive.
She works closely with teams across properties, ensuring that employees fit perfect to their roles and that HR policies and procedures align with business.
Manolis is a C-level executive with 28 years of experience in roles of high responsibility in the hospitality sector, to include Managing Director of Chandris Hotels & Resorts, oversaw five hotels, Board Member of SETE (Greek Tourism Confederation), Member of the External Advisory Board of University of the Aegean, Project Director for the renovation and opening new hotels and Executive Consultant of SGS, a leading multinational certification company in Greece, for the establishment and development of the Hospitality Department.
Skilled in handling complex daily business operations, setting strategic policies and parameters that drive operational efficiency, coordinating staff and creating productive working environments, designing advanced business process improvement plans and profit analysis reporting systems which improve procedures, business performance and bottom-line profits.
He is graduated from the Athens University of Economics and Business, Greece (former ASOEE), holds an MBA from the University of Wales, Cardiff Business School, and an MSc in Hotels Operations from the Institute of Higher Education, Glion, Switzerland. He was a champion and member of the Greek National Athletics Team in 100-200-4x100m.
Appointed General Manager for numerous global hotel brands and possess a deep understanding of hospitality and tourism industry, both in Greece and abroad.
He has been working for some of the biggest international hotel chains in the world, like Hilton Hotels & Resorts and InterContinental Hotels Group in Greece, while he has working experience in the market of UAE, at Rotana Hotels & Resorts & at Al Bustan Rotana Hotel.
Being an Asset Manager for the ex-Ionian Hotel Enterprises SA Subsidiary of Alpha Bank, he successfully oversaw the total reconstruction and reopening of Hilton Athens.
Yiannis has served General Manager roles at Melia Hotels International for Dubai and Athens, while prior to that, he oversaw 5 properties owned and managed by Grecotel Hotels & Resorts.
Dakis is a seasoned IT expert with a wealth of knowledge and experience in hotel IT systems.
With over 25 years of hands-on experience in the industry, Dakis has developed a reputation as a trusted IT and reliable expert in hotel IT solutions. He is passionate about staying up-to-date with the latest trends and technologies in the industry.
He has a deep understanding for hotel property management systems, while provides secure solutions and constant support, ensuring that properties can operate at peak efficiency.
His working experience includes airline companies, logistics, IT companies and software houses, small boutique hotels to large international hotel chains.