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The framework of hotel leasing in Greece : Case study of hotel unit leasing and upgrading in Chania area

Louvitakis Emmanouil

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Summary

In a modern business environment, the need to finance business plans is seen as imperative, especially when these projects are geared towards investment-intensive investments such as the hotel business, one of the fastest growing sectors of the economy. In the midst of an era with access to the credit system becoming extremely limited, alternative forms of financing such as the institution of leasing can be a lever for growth or have adverse effects. This is also the case with the present work, whose purpose is twofold. On the one hand, to analyze the institutional and legal framework of the leases, their prospects as an alternative form of financing, and on the other, to consider the application of the leasing institution in the hotel industry in order to record the impacts of its implementation following the changes that led to the Accounting System, the International Financial Reporting Framework 16. The work is structured in two parts, as follows. In the first part, a theoretical approach is made to the concept of tourism and its basic economic figures, listing the types of hotel businesses operating at national level, and illustrating their financing needs while presenting the most common sources of funding. Then, the theoretical background of the leases, their legal and regulatory framework is developed and the key changes identified, the new International Accounting Reference Framework (IAS) and the accounting system are identified. In the second part, we present the implementation of the leasing institution through a case study focused on the hotel industry. More specifically, the case study concerns the leasing and renovation contract of a Hotel Unit. The preliminary stages of this are the general description of the existing status of the unit, the analysis of the internal and external environment ('SWOT Analysis') and the market segmentation. Then, as the strategy to be implemented by the company is developed, the target market is identified, the upgrades of the unit are analyzed and the operational structure is reconstituted. Next, the project costs are analyzed, and on a budgetary basis, the unit's revenue and expenses are captured to prepare its financial statements, such as the Income Statement, Balance Sheet and Cash Flow Analysis. Finally, the financial valuation of the investment is described using the Net Present Value (NPV) method, the Internal Rate of Return (IRR) and the use of significant indices to assess whether the investment plan is viable. The objective is to examine the profitability of the lease, as an alternative form of financing after applying the changes that led to the accounting treatment of the leases in the International Financial Reporting Standard 16 (IFRS 16), and to examine the viability of the investment plan.

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