While the number of tourists in the world has broken a record, investors are investing in hotels — one of the most promising real estate classes in the near future.
According to experts, terrorist attacks have affected not the number of trips, but their direction. Hotels remain an attractive asset class for good reason:
they bring a relatively high profitability: 4-6%, whereas, for example, street retail 3-4%, and long-term rental apartments only 2-3% per annum.
In the case of a large hotel, you can sign a contract with the operator for 10-20 years.
The hotel business is designed for a long-term perspective, and this gives hotels the opportunity to survive the ups and downs of the market in a troubled economic and political environment. There are many ways to manage and own real estate — the relationship can be regulated by a management contract, a franchise agreement, a lease agreement. For example, a franchise agreement for hotels often subscribes to 25-30 years. Hotels differ from other types of real estate in that each room is sold every day anew. This allows hotels to be flexible and instantly respond to the changes in the dynamics of supply and demand. In normal market conditions, hotels usually begin to bring stable revenue four to five years after the opening.
Real estate can also be owned. Depending on the share of ownership or management, the investor can expect to increase payments on invested capital or increase in revenue and capitalization of the hotel. In addition, entry into the market in some regions with a low level of competition can be relatively simple if it is a right brand in the right place with the appropriate investment.
What is the most secure and profitable investment?
Now Greece offers excellent prospects for investment in hotels. The main reason is that the market will soon reach the bottom and begin to grow. According to the Bank of Greece, property prices in the country since 2008 (when the last peak of prices was fixed) by 2016 fell by 40%. A square meter in the center of the city costs about one and a half times cheaper than in Portugal, in two — than in Spain and almost three — than in Italy.
Thus, there is a great potential for price increases. According to forecasts of Trading Economics for 2020, real estate prices in Greece will grow by 22%. This will contribute to GDP growth (by 0.4% per year) and a decrease in unemployment (from 21.7% today to 18.8% in 2020).
Demand from foreign investors is stimulated by cheap “golden visas”: residence permit in Greece can be obtained with the purchase of real estate worth at least €250 thousand. For comparison: in other competing markets are Spain and Portugal — the threshold is €500 thousand.