After three years of ongoing slump in tourist revenues, the liquidity of several hotel units has been deteriorated while Cyprus banks might be enforced to write-off loans of millions of pounds granted to the hotel sector.
According to latest Central Bank data, the island’s tourist sector owes to the Cyprus banks £864 million. This includes the hotel industry’s debt of £750 million. A large part of the sum is attributable to the investments made during the period of rapid tourist development.
However, things in domestic tourist industry changed sharply after 2001. Although tourist revenues stood at £1,271.6 million in 2001, tourist revenues in 2004 dropped 22.7% to £982.3 million.
Bank officials believe that the provisions for bad debts in the sector for 2004 have reached millions of pounds. “Bad debts increased impressively since last year. Most hotel units are unable to meet their obligations. The negative condition of the tourist industry in the past few years has affected certain hotel units”, a bank official who preferred to retain his anonymity told StockWatch.
“Although PASYXE’s request could be a good solution for the hotel sector, each case must be examined separately. It could offer substantial help to the viable units. Meanwhile, hoteliers must realize that they should improve the prospects of their hotel units”, he added.
“The hotel units could rely on additional borrowing for improvement purposes if they prove that their lending will not be of high credit risk. The provisions of Basel 2 must be taken seriously into account. There are margins for new loans”, another bank official told StockWatch.
Tourists
Meanwhile, despite pressures by the hoteliers for the granting of more loans, banks are in a dilemma since hotels
become more and more unattractive. According to CYSTAT data, tourists prefer to stay in “relatives or friends” or in self-owned homes. In 2002, 73% of the tourists that visited the island stayed in organized hotel units (hotels, apartments, tourist villages), while in 2004 this percentage dropped to 72.1%.
According to latest Central Bank data, the island’s tourist sector owes to the Cyprus banks £864 million. This includes the hotel industry’s debt of £750 million. A large part of the sum is attributable to the investments made during the period of rapid tourist development.
However, things in domestic tourist industry changed sharply after 2001. Although tourist revenues stood at £1,271.6 million in 2001, tourist revenues in 2004 dropped 22.7% to £982.3 million.
Bank officials believe that the provisions for bad debts in the sector for 2004 have reached millions of pounds. “Bad debts increased impressively since last year. Most hotel units are unable to meet their obligations. The negative condition of the tourist industry in the past few years has affected certain hotel units”, a bank official who preferred to retain his anonymity told StockWatch.
“Although PASYXE’s request could be a good solution for the hotel sector, each case must be examined separately. It could offer substantial help to the viable units. Meanwhile, hoteliers must realize that they should improve the prospects of their hotel units”, he added.
“The hotel units could rely on additional borrowing for improvement purposes if they prove that their lending will not be of high credit risk. The provisions of Basel 2 must be taken seriously into account. There are margins for new loans”, another bank official told StockWatch.
Tourists
Meanwhile, despite pressures by the hoteliers for the granting of more loans, banks are in a dilemma since hotels
become more and more unattractive. According to CYSTAT data, tourists prefer to stay in “relatives or friends” or in self-owned homes. In 2002, 73% of the tourists that visited the island stayed in organized hotel units (hotels, apartments, tourist villages), while in 2004 this percentage dropped to 72.1%.
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