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NPLs and tourism, a treasure worth 15 billion

22 September, Monitor Immobiliare

The tourism-hospitality market in Italy still offers many investment opportunities. Bad loans are an occasion for whom wants to invest, especially in tourism.

The figures

In 2017 the investments in the hospitality market were 1.6 billion euro, 60% of which were from international investors, representing 1.1 billion. On the overall, investment volumes have grown by 7.2% since 2016. This is a significant result if we consider that 50% of the bad loans on the Italian market are secured by real estate assets, 10% of which are hotels.

There are currently 13-15 billion in touristic assets which can be an opportunity for new projects in the hospitality sector.

Such wealth is attracting an increasing number of investors, domestic as well as international, as the credits are collected mainly through judicial procedures, namely auctions. There is plenty of occasions in the country, if we think that there are approximately 234,430 properties for auctions in Italy, 19% of which in Lombardy. Hotels represent only 1%. We must also consider that there are over 6 million unlet properties which can be potentially used in the market, as a part of them are connected to NPLs.

Therefore, there is a potential and at convenient prices too, but one has to be quick to catch them. Deloitte has expressed this view in its report during the conference “NPL in tourism, an opportunity and a virtuous process”, organised together with the credit management company GMA in Milan which was focused in the tourism-hospitality sector, its growth potential and the opportunities offered by the Italian property market, especially for foreign investors.

As Deloitte highlights in its report, the credit market is currently very active and we see the rise of UTPs (unlikely to pay). The transactions concerning the tourism-hospitality segment have amounted to over 18 billion euro in the past few years, and they’re expected to grow by 15%.

But there’s also the time to consider. In a couple of years, the stock of impaired loans will reduce due to the transfers and the cancellations, resulting in the reduction of the offer of alternative investments.

Although Italy has a considerable stock of NPLs backed by hotels, banks and servicers have still little experience on how to manage them. Therefore, there are still many challenges to create a system to manage this type of assets efficiently.

The interviews

Giorgio Palmucci, Associazione Italiana Confindustria Alberghi president: “NPL are an opportunity for the hospitality sector. Tourism is currently growing, and the Italian hospitality system is seeing the consolidation of its expansion started in 2016. We see that many international players are looking for new opportunities. In terms of investments opportunities, NPLs can provide interesting results”.

Raffaele Paletti, Rescasa president: “Real estate operators must realise that there it’s possible to invest in NPLs also in the hospitality sector. We’re monitoring the apartment market of the touristic sector which is an emerging phenomenon. It’s possible to think of residential properties for touristic use.  For instance, in Milan, many hostels and student houses are opening. We don’t think anymore at hospitality in the traditional interpretation, rather at a complex segment with several categories within”.

Umberto Rorai, Deloitte partner corporate finance advisory: “Italian banks are currently burdened by a 160-billion gross exposure to bad loans, half of which are backed by properties, while the other half is not guaranteed. If we analyse the sector, tourism and hospitality facilities represent between 12 and 15 billion euro in terms of gross exposure. Every year, about 6 billion euro are invested in tourism, whose growth potential is very important for the development of the national economy. We also consider impaired loans before they turn into non-performing loans since they represent an equivalent exposure concerning net value”.

Source: Monitor Immobiliare

Translator: Cristina Ambrosi

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