Tourism Is Heavily In Debt

2021-02-13   |   by CusiGO

The worst year in the history of tourism is a business structure that has accumulated millions of dollars in losses, the workforce is paralyzed, the balance sheet is full of ICO guaranteed loans, and if they continue to have no income, it will be difficult for them to start paying back in March. According to exceltur group, business turnover in the industry fell nearly 70% last year. Travel agencies, leisure operators, city hotels and transportation are the most punished.

2020 also leaves the first victims, who may be fewer than expected after a year of pandemics, closing and freezing cash registers. Previously, record foreign tourist arrivals and the resulting revenues have been one of the containment measures, as have state aid in the form of RTE or bank guarantees. Gabriel escarrer, chief executive of Meli á Hotels International, admitted: “unlike the last crisis, this crisis has attracted healthier, less leveraged companies, which is why only a few small companies have failed.” Gabriel escarrer, chief executive of Meli á Hotels International, lost 485 million euros in the first nine months of 2020, By the end of the year, he admits, they are likely to be close to 600. The pain in the industry is an open secret, and it promises to lead many companies forward.

So far, companies such as pullmantur, turoperators politours or trapsatur have submitted creditor bids. Other companies, such as hotusa, have just applied through state-owned industrial holding company (SEPI) for a government backed strategic enterprise solvency fund. This is the first large hotel, which costs 190 million euros. Although it has joined a series of airlines that use the lifeline: globalia (which has received an order of 475 million euros from European airlines), alvoris (the travel department of the Barcelona ó group, in which globalia participates with a 49.5% share, and the 240 million euros applied in March are expected to be approved); With naviera Armas, wamos (the parent company of nautalia travel agency), Tech Hotel (the owner of Petit Palace) or Abadi and serhs group, we are committed to the hotel and catering industry.

The lifeline of these companies (eight out of 15 turn to the fund) is more than 1 billion euros. Although business is expected to increase by March, by 2020, the company will close its accounts and be well aware of its survival opportunities.

These companies, which account for 12.4% of GDP in 2019 and only 4.3% a year later, are the most obvious side of the damage caused by the epidemic. ‘it’s amazing that the industry doesn’t have specific public rescue plans like other countries,’ says Yago fern á ndez, a partner at consulting firm Alvarez Marsal. Especially “when tourism companies are facing extensive restructuring.”. Since November, the consultancy has been looking for new gaps and maturities for the refinancing of ICO credit and customer debt. ‘given the lack of direct assistance, these are mainly recapitalization processes,’ said Laura Hernando, a partner at Colliers International.

“Some companies either seek private financing through debt funds, which cost three to four times as much as bank debt, or sell assets. The problem is that buyers offer 30% or 40% discounts, and shareholders are more willing to choose more expensive financing,” Fernandez said.

“There are hotels all over the market, even though companies don’t want to admit that they intend to sell them,” says cor é mart í n, investment manager at Christie & Co. Tryp, hotusa, Rui, H10, NH… These are all lessons for those who want to divest assets to gain liquidity. On the other hand, many international investors are directly knocking on the doors of the most suffocated chains, either buying their buildings or providing services as financial partners. They are well-known investment funds such as Goldman Sachs, Blackstone, Pygmalion, Apollo or Cerberus. “In the next two months, they’re going to announce wallet purchases; it’s too early to buy the whole chain, probably from the summer,” Martin estimates.

Bernardo Guti é rrez de la Roza, ontier’s chief executive, said there were already people considering selling, merging and acquiring businesses to gain liquidity to support its solvency. Arturo gayoso said: “the further growth of the company’s business has so far been more related to the use of opportunities to rotate assets, divest to obtain liquidity or allow investors to enter the capital market, so as to strengthen the positioning of further industry integration.”. Deloitte financial advisor partner. Because, according to Hernando, new investment funds are entering the hotel market. Like alchemy or big assets. “There is a maximum interest,” he said.

The problem with these deals is that the visibility of the tourism recovery is low. The view of stock analysts. Many hotels in the Balearic and Canary Islands have been closed for a year, and they don’t know if they can open this summer. How do you calculate a transaction when you don’t know when there will be income to make money? Of course, Easter is considered a lost week. Maybe some Spanish tourists can bring some happiness to the industry, but as long as the vaccination process is not accelerated and the threat of a new round of coronavirus is eliminated, there will be no more happiness.

“Easter will not happen unless there is a fundamental change that is unlikely to happen. Raul Gonz á lez, chief executive of Barcelo’s EMEA Hotel, analyzed: “summer is not yet certain.” With half of the hotels closed, Spain’s 15% occupancy rate is “in a bad situation,” he said. Gonz á lez pointed out that the Barcel ó group will end up with a 70% decline in revenue in 2020, “we will break the record of negative growth”, and he expected the loss to exceed 100 million euros.

So far, collier has recorded hotel price discounts of 8% to 12% in 2020, which is still far below the requirements of investment funds, not just them. Companies like Barcelona ó and Meli á, buyers of chain stores and corporate portfolios, are expected to cut prices by at least 20% before the pandemic to close. They all think they will start in the second half of this year.

Everything will be fine after summer. Whether it’s corporate deals, asset acquisitions, competition or bankruptcy. Experts estimate that when deals and the discounts that come with them start to appear, companies will lose their fear. By 2021, hotel investment may double, reaching 955 million euros last year, 62% less than in 2019. Collier’s current business value is EUR 1.45 billion.

Recovery, however, is far away. “I don’t think by 2024 we will be able to return to the level of income we had in 2019. It is hoped that some hotels will arrive early in 2022 or 2023, but then the tickets will have to be recovered, “said Barcelo’s chief executive. By 2023, Melia’s people will be successful. Escarrer estimates that it will arrive at the resort faster than Urbano, which expects revenue this summer to be half of last year’s without coronavirus and cash crunch, The liquidity and debt of viable companies in the industry lead to competition and bankruptcy “because it is almost difficult to sustain 18 months without income and assistance”. Their hopes are based on the government’s assistance to restore the solvency of viable companies.