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Are we close to an upturn in the outlook for Southern Europe?

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The southern European countries of Portugal, Italy, Greece and Spain in particular have endured severe economic pain following the financial crisis, resulting in a downturn in all sectors, including tourism and hospitality.  However, with an improving hotel trading outlook, they may be about to reach a turning point which will make them a focus of investment activity in the next few years.

That’s according to a new report from Christie + Co, Europe’s leading hotel property specialist and patron sponsor of IHIF and leading data benchmarking company in the hotel sector STR Global, which has been launched at the Berlin conference.  

Christie + Co’s International Managing Director and Head of Consultancy Andreas Scriven says: “The southern European economies have gone through turbulent times since the start of the recession in 2008 and there remain concerns about the recovery. Tourism is a major driving force in these countries and while the sector has experienced a sharp plunge during the protracted period of economic weakness, it was the lifeboat that kept the markets afloat by bolstering the economy, softening the impact of unemployment and in some areas, even outperforming the general real estate market.”

The report adds that historically the hospitality sector in these four countries has relied on domestic-driven demand which has accounted for up to 70% of overnight stays.  But the reduction in discretionary spend that resulted from the downturn saw this figure decline significantly.  However, since 2008, the international inbound market has grown from 10% to 36% of total arrivals which has helped to offset the decline in domestic arrivals and softened the impact of the economic downturn.

International tourism has also led to an expenditure increase of more than 24%, bolstering a marginal 0.7% growth in domestic spending since 2009. According to the World Travel and Tourism Council, by 2024 foreign travellers are projected to spend more than €165 billion in these countries, representing a 47% increase.

Scriven adds: “In the UK we have seen trading performances gradually strengthen and funding become more available.  Investors coming out of North America were principally responsible for driving this activity and I expect to see this funding start to move more widely into Europe, driving further growth of the tourist industry in Portugal, Italy, Greece and Spain.”

Looking ahead, the report makes some predictions for each of the countries:

• Portugal, despite economic recovery, has a limited number of investment opportunities due to the relatively small size of the hotel market; therefore deal activity is expected to concentrate in Lisbon, Algarve and Porto

• Italy has more to do to resolve the inefficient labour legislation and to stimulate growth of the sluggish economy, so expectations are cautious regarding investment opportunities

• Greece – here investment is likely to increase as banks seem ready to implement a new law on non-performing loans which is likely to facilitate and encourage investment.  Last week’s announcement that the Eurozone Finance ministers have approved reform proposals from Greece to gain an extension of its bailout is to be welcomed. However, the on-going uncertainly following the recent election might deter future investment

• Spain’s increased hotel performance levels have already attracted investors from the private equity and real estate funds, as mentioned previously, largely from the US. This coupled with greater availability of assets through bank-led / debt sales has led to the highest number of hotel transactions in comparison to Portugal, Italy and Greece. We anticipate continued investor interest in the Spanish market as hotel performance continues to improve with the main focus being on the principal markets of Madrid, Barcelona, Mallorca and the Canary Islands. Some areas along the southern Mediterranean coast such Marbella are also likely to generate some interest

For further detailed analysis and commentary of each country’s tourism industry and hotel market, the report can be downloaded from

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