New financing forms are therefore becoming necessary as the role of the banks changes. The consultancy MRP hotels, based in Vienna, organised an expert discussion round on this issue. Speaking at the event were: Walter Bleyer (Bleyer Financial Consulting), Dr Daniel Jelitzka (Managing Partner JP Immobilien), Peter Ulm (CEO 6B47) and Dr Peter Wendlinger (HYPO NOE Group).
Martin Schaffer, Co-CEO of MRP hotels, notes that according to the Austrian Hotel and Tourism Bank (OEHT), the equity base of the Austrian hotel industry has considerably improved, though is still around 9% of total assets in the 4-star category. This figure is the Austrian average. Figures for operator-led or investable hotels are not available (approx. 85% of Austrian hotels are owner-managed). Experience shows that the typical loan-to-value (LTV) requirement is around 30 to 40%. For less attractive projects, LTV ratios of up to 50% are demanded in Germany in order to secure a commitment from a bank.
Whereas, according to Dr Peter Wendlinger, “nine out of ten applications for finance were decided positively, this figure is just one in ten today.” This is largely due to the fact that, in case of hotel real estate, both development risk and capital buffer requirements have risen significantly. Walter Bleyer also states that “in contrast to the office building, a hotel needs to be leased afresh every single day and banks don’t understand this business. Only a few banks have a competent hotel team.”
Banks becoming partners for alternative forms of hotel financing finance
Peter Ulm asks how the strict rules imposed by the Austrian financial market supervisor (FMA) can be made manageable since, in his opinion, there is sufficient money on the free capital market for hotel real estate. Ulm: “We are not currently worrying about where we get the money, but how we can properly comply with all rules set down by the FMA and AIFM.”
Given the strong restrictions in the banking sector, alternative sources of finance must be tapped into the future. Dr Jelitzka believes “bonds, funds or investor Clubs” to be feasible. Even “cover-pool eligible products for insurance companies will become more popular.”
In the future, banks will also be an important Distribution partner for alternative financing models as well as a provider of conventional foreign-currency loans. Jelitzka says here: “The role of the banks hasn’t deteriorated, it’s different. Whether this is realistic or not will certainly be discussed by more experts at Expo Real next week in Munich.