International investing in Mediterranean resort and hotel real estate A joint survey by Tranio and The Mediterranean Resort & Hotel Real Estate Forum (MR&H) 2018 www.tranio.com + www.mrandh.com
International investing in Mediterranean resort and hotel real estate International investing in Mediterranean resort and hotel real estate is on the rise. This is evidenced by the results of an online survey conducted jointly by Tranio and MR&H in 2018. The majority of respondents (86%) note that the activity of international investors is increasing. Figure 1. How would you rate the pace of international investing in Mediterranean resort and hotel real estate? It is increasing 86% It is at the same level 12% It is decreasing 2% A joint survey by Tranio and MR&H 3
More than half of the respondents surveyed by MR&H (57%) believe that resort and hotel real estate is the most popular, or one of the most popular, categories of investment properties in the Mediterranean region. At the same time, only 34% of Tranio s respondents share this opinion, and about half of the respondents indicate that interest in resort and hotel real estate is at an average level versus other types of income property. In both cases, only a small proportion of those surveyed consider this category unpopular. Figure 2. How popular is resort and hotel real estate in the Mediterranean for international investors versus other types of income property? Very popular Tranio respondents 34% MR&H respondents 57% At an average level 52% 39% Less popular 14% 4% 4 International investing in Mediterranean resort and hotel real estate
Spain, Greece and Italy top the ranking as the most attractive countries for investors, although their positions are evaluated differently by respondents of Tranio and MR&H: Figure 3. Which countries in the Mediterranean are most attractive to international investors in resort and hotel real estate? Tranio respondents MR&H respondents Spain 59% Greece 85% Italy 36% Spain 50% Greece 23% Portugal 20% France 23% Italy 10% Cyprus 10% The survey result exceeds 100% because respondents could name more than one country. A joint survey by Tranio and MR&H 5
The factors which make a country popular among investors are a stable economy and low bank charges (Spain, Italy, France), the residence permit for investment programmes (Spain, Portugal, Cyprus), and a growing market with high yield prospects (Greece). According to some respondents, investor interest in Spain temporarily stopped increasing after real estate prices hit rock bottom and bank charges began to rise. And if we take Greece s case, one of the respondents noted that investors in Greece are buying up distressed assets for redevelopment or conversion, but shy away from any greenfields. The investment environment is complicated by protracted judicial procedures. Nevertheless, if the whole bureaucratic climate improves, so will investment. As to the locations popular among investors in Greece, 55% of the respondents named the Cyclades Islands, namely Tyrа (Santorini), Mykonos and Paros. Many also consider Athens (36%) and Crete (27%) promising, while some respondents mention Rhodes and Halkidiki. In Spain, 39% of the respondents believe that the Costa del Sol and other locations on the Andalusian coastline (Malaga, Marbella, Benalmadena, Torremolinos, Fuengirola) are particularly attractive. Barcelona is preferred by 22% of those surveyed, and the Balearic Islands (primarily Ibiza) and Costa Brava are among the other locations mentioned. Finally, Rome, Milan and Puglia were each named by 18% of the respondents as preferred destinations. 6 International investing in Mediterranean resort and hotel real estate
Answering the question of who are the top nationalities investing in Mediterranean resort and hotel real estate, respondents said that nationals from Russia, the United States, China and the Arab countries, and other countries of the former Soviet Union, top the list. However, both Tranio and MR&H respondents differ in their views as to the ranking of the investors regarding their nationality. Figure 4. What are the top nationalities investing in Mediterranean resort and hotel real estate? Tranio respondents MR&H respondents Russia 65% USA 47% USA 41% Israel 35% China 29% China 29% Arab countries 29% Arab countries 29% UK 24% Russia 29% Germany 24% UK 18% Switzerland 18% Turkey 18% The survey result exceeds 100% because respondents could name more than one country. According to the respondents, in Greece, real estate funds from the United States, as well as British private equities, stand out among investors. A joint survey by Tranio and MR&H 7
The most popular types of resort and hotel real estate are 3/4-star hotels and resorts. Hotels top the list of Tranio respondents (33% of the votes), while resorts lead the MR&H rating (38% of the respondents votes). Figure 5. Which type of resort and hotel real estate in the Mediterranean is most promising for international investments? Mid-scale hotels (3/4-star) Resorts Luxury hotels (5-star) 29% 27% 25% Serviced apartments, Extended stay 15% Budget hotels 4% One of the respondents said that the concept of vacations has completely changed over the last few years. Tourists are searching for new destinations in the Mediterranean peninsula, looking for a more authentic and "local" experience. So, traditional "big" hotels are facing a challenge whereas the new type of hotels like serviced apartments, which offer a more authentic experience most of the time, are gaining ground. It is worth mentioning that a number of traditional hotels have changed into serviced apartments. 8 International investing in Mediterranean resort and hotel real estate
Almost half of the respondents (46%) believe that the main reason for buying resort and hotel real estate in the Mediterranean is a desire to have their own housing where they can take a vacation. However, almost the same number of the survey participants (41%) think that investors are buying such properties to diversify their portfolios. Figure 6. What is the main reason for international investors to buy Mediterranean resort and hotel real estate? Holiday, second-homes Portfolio diversification EU residency High yields 46% 41% 37% 35% Tax optimisation 2% The survey result exceeds 100% because respondents could choose up to 2 answer options. A joint survey by Tranio and MR&H 9
Sometimes an investment can become unprofitable, and 72% of the respondents believe that the main reason behind the failure is the ineffective management of the investment asset. Other answers lag way behind. Figure 7. In cases when an investment made in Mediterranean resort and hotel real estate becomes unprofitable, what is the main cause? Ineffective management 72% Poor location choice 39% Overhead operating costs Political or economic instability 20% 28% Terrorism threats 9% Low occupancy 4% The survey result exceeds 100% because respondents could choose up to 2 answer options. 10 International investing in Mediterranean resort and hotel real estate
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