Foros CEO Dobromir Ganev: Bulgaria Hotels Forced to Put Up 'For Sale' Notices

Novinite Insider » INTERVIEW | Author: Milena Hristova |August 30, 2010, Monday // 11:39
Bulgaria: Foros CEO Dobromir Ganev: Bulgaria Hotels Forced to Put Up 'For Sale' Notices

Interview of (Sofia News Agency) with Dobromir Ganev, CEO of Foros real estate agency.

Are there many hotels for sale in Bulgaria at the moment? What are the sales and supply levels in comparison with the last two years? What brought about this trend?

It is a fact that we have an increased supply of hotels for sale. Just one anemic summer season, a drop in tourists and prices of accommodation and services were enough to discourage part of the hotel owners and they were forced to sell or rent out their hotels due to debts to suppliers, creditors and staff. Other just shut down waiting for better times to come.

Back in 2005 the number of hotels officially put up for sale ranged between 150-250, while at the moment they total 350-550. I want to stress that this is just the number of hotels officially put up for sale on the sites of real estate companies. One of the peculiarities of the market is that the sale of many hotels is not officially announced since owners are worried that this might demotivate the people working at the hotel, who are hard to find anyway.

The hotels currently offered for sale on the market include not only small family hotels, but such that can accommodate more than 100 people. Prices range from EUR 400,000 to EUR 1 M, depending on the location, capacity, category, turnover of the hotel and the contracts it has with tour operators. Supply is most abundant on the Black Sea coast.

Another interesting fact is the increased number of hotels, sold by private enforcement agents. A check in the registry for public sales of the Bulgarian chamber of private enforcement agents shows that there are 17 hotels offered for sale at the moment, up by seven in comparison with the beginning of the year. Most of these hotels are located on the Black Sea coast, others – in the winter resorts. There are also two hotels for sale in Sofia, one of which spreads over 15 000 square meters and its asking sale price exceeds EUR 700,000.

There are two factors, which brought about the increase in the number of hotels for sale in Bulgaria. Firstly, most hoteliers did not manage to cope with the difficulties that they faced with the onset of the crisis. The sharp drop in tourists, prices and turnover made it impossible for them to cover their debts. Second comes the overconstruction that Bulgaria’s coastal and winter resorts witnessed as a result of the huge investments poured into the construction of hotels over the last five years.

Which parts of the Black Sea coast offer the most intensive supply of hotels for sale?

The volume of investments poured into construction activities along the Black Sea and particularly in the construction of hotels grew tremendously over the last few years. Our resorts turned into cities of concrete, where the greenery is the most visible absence.

Now a big part of these hotels have been offered for sale and supply considerably outweighs demand. About 70% of the offers of hotels for sale come from the overconstructed coastline of the Southern Black Sea, twice as many as those in the north. Most of these hotels are located on the periphery of resort complexes and the cities, but lately there have emerged some offers for hotels located on the first and second beach line.

Data of Foros real estate agency shows that supply of properties for sale is abundant on the Southern Black Sea coast, particularly at the resorts of Sveti Vlas, Sunny Beach, Ravda, Nessebar, which account for 45% of all offers of hotels for sale.

Buyers can also find good sale offers for hotels located in the resorts of Golden Sands and Sveti Konstantin near the town of Varna, but for the time being their number is considerably lower.

Who are the potential buyers and are they difficult to find? What type of hotels is most attractive for the buyers and have most often secured deals for the sellers?

I would not say that demand is high, especially as far as the bigger hotels are concerned. Those tagged up to EUR 500,000 are in much higher demand particularly by middle-class investors and Russian buyers.

Investors are now turning their attention to hotels from the so-called economy segment. According to experts at the moment there is a shortage of this type of hotels, which offer good quality-price ratio.

What are the average income returns on investments in hotels in Bulgaria?

Yields are low and never guaranteed. It takes very professional management and marketing to turn the purchase of a hotel into a successful investment. Investors can hope to achieve yields of about 7-8%, depending on the location, type of hotel, services it offers, annual bed occupancy and other factors.

What is the range of prices for small and big hotels?

Asking prices start from EUR 400,000 and sometimes even exceed EUR 1O M, but there are only sporadic deals at much lower levels.

The majority of hotels offered for sale at the moment are completely furnished, spread over 900 square meters and offer 20-25 rooms. The average sale price for this type of hotel is EUR 500,000 or EUR 550-650 per square meter. These hotels are located on the periphery of the sea resorts or can be small family hotels, in which case the price can be negotiated down to EUR 350-450 per square meter.

The average asking sale price along the Northern coast is about EUR 950-970 per square meter, while the lowest levels hit EUR 700-750, which is two times higher than the bottom levels of prices sought in the sale of hotels, located at Sunny Beach resort.

Which are the problems that foreign investors face most often?

Many foreign investors still continue to view investments in Bulgarian hotel complexes as too risky to be worth it. The high number of hotels, which sprang up in the coastal and winter resorts over the last year, the lack of suitable locations in the capital and the low yields are factors that stop investors from coming to Bulgaria. Some of them also complain of the bad infrastructure.

Is it true that the categories of the majority of hotels put up for sale don’t match international standards?

There are definitely such cases, but these are exceptions, rather than the rule.

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