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Tourist apartments and the credit crisis

22 October, Il Sole 24 Ore

Tourism is one of Italy’s biggest resources, but also a problem concerning indebtedness, as many businesses are not able to pay back the bank loans, and the loans become NPLs. 10% of the non-performing loans in Italy are backed by hospitality assets, a rather high percentage. These figures have been disclosed in a survey by Deloitte and Gma (a company operating in credit management), showing a worrying scenario. The current value of NPLs secured by hospitality assets in Italy is equal to 13-15 billion. At the same time, the investments in the industry amounted to 1.6 billion, 60% of which by international investors, corresponding to 1.1 billion. On the overall, the investments grew by 7.2% in 2016. The increased interest in investing in the sector might turn the NPL issue into an opportunity for tourism and the national economy in general.

“At present, the NPL market is very active. Besides, we’re also assisting at the development of the UTP market (unlikely to pay). The stock of bad loans will reduce in a couple of years thanks to transfers and cancellations, resulting in a reduced offer for alternative investments” – commented Umberto Rorai, Deloitte partner. – Transactions for hospitality assets has been over 18 billion euro in the past few years, and they have been growing reaching peaks of 15% in terms of volumes”.

Banks and servicers sometimes don’t have the necessary skills to manage such credits. “An NPL collateral can be represented by various assets. Hence, they require a different approach and servicing depending on the category”, commented Emanuele Grassi, Gma Ceo.

Riccardo Serrini, Prelios Ceo, explained: “Prelios Credit Servicing manages at present over 250 hospitality assets put as a guarantee of NPLs”. Why all these difficulties then, considering that Italy is one of the biggest markets concerning tourism? Serrini continues: “The reasons are mainly structural and historical. There aren’t big hotel chains in Italy. The ownership is fractioned. Prestigious properties are often family-run, with issues connected to access to capitals and the hand over to the next generation. Hotels are generally small compared to the international standards. All these factors make hotels little appealing for the big hotel chains. How can they be used? “The situation might be very interesting for those players of the sector with a medium-long perspective, looking to create a quality hotel chain of medium-small dimensions, with experience in catering to an international clientele and very efficient from an operational point of view, from marketing to the booking process. These might be an innovative and smart solution, profitable for the players, and very promising for these assets which are one of the main resources of our countries”, Serrini concludes.

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi