Rapid Hotel Investment Review: 80-room 3* Hotel in Athens, Greece

Navigator Consulting completed a Rapid Hotel Investment Review for the acquisition of an existing 80 room, 3* hotel in Athens located in the Central Business District along a central avenue. The hotel had been operating for over 40 years and needed a significant renovation to upgrade standards to current business practise. Our Investment Review provided the existing owners a valuable guideline for the hotel valuation and longer-term hotel repositioning and investment strategy. 

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The Rapid Hotel Investment Review is a preliminary commercial, operational and financial assessment prepared for the internal decision making of the commissioning client. It does not constitute vendor due diligence, acquisition due diligence, a formal valuation or an assurance opinion, and should not be relied upon by third parties.

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City Hotel Investment in Athens

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Although Athens has become a major tourism destination in Greece and Europe, the tourism infrastructure and hotel product often leaves much to be desired. A large number of hotels and equivalent commercial buildings were constructed in the era of rapid urbanisation in the mid-1970s to the 1990s.

 

While building standards at the time prioritised anti-seismic, reinforced concrete construction, the ergonomy of hotel management was often substandard by modern practise. This is seen, for example, in cramped rooms and hallways; less-than-full bathrooms, including dysfunctional shower stalls; cramped elevators; a lack of parking or unloading/loading space in front of the hotel; and inadequate hotel food and beverage and reception facilities. 

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For this reason, many Athens hotels feature a low Average Daily Rate and a relatively low EBITDA, because they rely not on a healthy mix of business and retail repeat guests, but on low-price and high-margin Online Travel Agencies (OTAs) and Tour Operators. 

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Investment Assumptions

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The initial hotel sales proposal was based on:

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• An asking sales price of € 6,500,000

• No restructuring or repositioning

• No valuation justification from hotel financial or accounting data. 

 

Navigator was asked to test under what conditions and sales price a hotel turn-around and repositioning could be successful. 

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What We Did

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Our Rapid Hotel Investment Review provided a focused commercial, operational and financial assessment of the proposed acquisition and repositioning. Based on the available documentation, management information, site observations and selected market benchmarks, Navigator tested the principal investment assumptions and developed an indicative investment case.

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Property & Hotel Product

• Two site visits, facilitated by the hotel’s accessible Athens location

• Review of the existing floor plans, room configuration and common areas

• Initial assessment of the property’s renovation requirements

• Development of an indicative hotel repositioning concept

• Assessment of alternative room, suite and hotel apartment configurations

 

Market, Revenue & Positioning

• Review of available historical hotel seasonality and yield information

• Selected destination, competitor hotel and pricing benchmarks

• Assessment of the hotel’s existing market position

• Development of revised occupancy and Average Daily Rate scenarios

• Identification of potential customer segments and revenue opportunities

 

Operating & Investment Assumptions

• Review of the principal hotel operating cost assumptions

• Assessment of online travel agency commissions and distribution costs

• Indicative review of construction, furnishing and common area expenditure

• Development of an initial capital investment budget for hotel renovations

• Assessment of maintenance and replacement expenditure over the capital cycle

 

Financial Assessment

• Reconstruction of a decision-oriented hotel profit and loss model

• Development of acquisition, renovation and repositioning scenarios

• Assessment of EBITDA, cash flow and investment viability

• Identification of the principal financial sensitivities and investment risks

 

The Rapid Hotel Investment Review was prepared to support an initial acquisition, pricing and repositioning decision. It did not constitute full hotel acquisition due diligence, a formal property valuation, technical due diligence or independent verification of all financial, legal and operating information.

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Principal Findings & Recommendations

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Based on our hotel analysis, the best investment option is to renovate the property as a mixed-used, 3* superior product for the following initial guest profile:

 

• Tourists (individuals, families, small groups) in transit in Athens; 

• Tourists implementing a short visit to Athens (typically 2-3 nights);

• Digital nomads;

• Business guests in the area. 

 

The revised hotel room mix would include:

 

• Keeping approximately 40 existing hotel rooms while renovating them; 
   

• Combining 40 of the existing hotel rooms into 20 suites or hotel-apartment accommodation for business guests; 
   

• Turning around the ground-floor restaurant facility in to a superior offering serving hotel guests as well as guests from the wider area. 

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Our analysis estimated that the capital required to complete and furnish the hotel would be approximately € 4,500,000, and would require a discount on the requested sales price. However, this could be offset by a partial owner earn-out. 

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The repositioning standard would be to the standard of Novotel, AC by Marriott, and Mercure. The defining features of the property would be:

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• Friendly, Young, International Service: Capitalise on strong labour availability in Greece to build a strong, small team, including the Manager/Receptionist, Deputy Receptionist, F&B Manager and Head Housekeeper.
   

• Strong Wi-Fi & Power: Strong bandwidth and ample accessible outlets or USB ports in both rooms and public working hubs.
   

• Flexible Public Spaces: Open-plan lobbies that double as casual co-working areas or coffee bars during the day. Better use and lighting of the subterranean Breakfast Room. Better use of the outdoor (pavement) space. 
   

• Streamlined Food & Beverage: 24/7 grab-and-go markets, healthy breakfast buffets, and casual bar areas rather than formal fine-dining restaurants.
   

• Compact, Efficient Rooms: Ergonomic work desks, smart storage, high-quality mattresses, and walk-in showers rather than expansive luxury suites. 

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Outcome

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Our Rapid Hotel Investment Review gave the hotel owner a more accurate basis for structuring the sales project and determining its financing requirements. The revised capital expenditure and operating forecasts enabled the hotel investor to reconsider and reposition their asset, including their sales price and likely renovation cost. ​

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As with many city hotel sales in Athens and other urban centres, this hotel investment review confirmed that in many cases, the renovation costs can be equal to the initial sales price, depending of course on the condition and location of the specific hotel building. ​​​