Goldman Sachs Scraps Plans to Build Hotel Brand in Greece

Just a few years ago, Goldman Sachs had ambitions to create a hotel brand in Greece that could one day expand to spots around the Mediterranean.

The Wall Street giant bought three seaside resorts in northern Greece in 2022, with plans to spruce them up and start welcoming guests as soon as this year. Tourism in the country was on a tear, and the bank saw an opportunity to snap up properties on the mainland with views of the Aegean Sea, rather than on the pricier Greek islands.

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This spring, Goldman abruptly sold the three hotels, barely breaking even on the roughly €100 million (about $117 million) it had invested in the project, according to people familiar with the matter. It also pulled the plug on its plans for a hotel brand in the region, the people said.

The resorts never opened, and some employees who worked on the investment are no longer with the firm.

Greek media described the deal as a “shipwreck.”

While the investment was a small one for Goldman’s asset-management division, it was emblematic of the firm’s search for big returns and steady fees to offset its lucrative but volatile Wall Street businesses. Its goal in Greece was to use mostly client money and financing to drive up the hotels’ value, then book big profits when they were sold. All the while, Goldman would collect management fees from clients whose money was invested.

When it bought the resorts, Goldman was enticed by the country’s strengthening economy, embrace of foreign investments, and cheaper property prices compared with Western Europe. Many hotels in Greece are also family-owned and switching hands to new generations who are more open to selling.

Other firms had also invested in the country, including Blackstone’s successful bet on Hotel Investment Partners, which has a portfolio of dozens of hotels in the Mediterranean that have spread to include around 10 in Greece. Goldman decided that its own Mediterranean adventure would begin in Greece.

The firm continued to cast about for additional hotel acquisitions and explored buying the Grand Resort Lagonissi, according to people familiar with the matter. The hotel sits on an area known as the Athenian Riviera, a stretch of beaches with new luxury hotels and residences. Goldman didn’t pursue the effort.

Around last summer, Goldman President John Waldron visited Greece and met with the country’s prime minister and local bank chief executives. His message was clear: Goldman was invested in the country in a big way, both through its investment banking and asset management.

But by then, Goldman’s investment in the hotels was souring. The renovations required a gut job that would cost far more than the firm had expected.

Late and over budget

Goldman had planned to largely demolish and rebuild the hotels, located on Greece’s northern peninsula of Halkidiki, before throwing open their doors again.

The firm’s asset-management employees in London and Spain worked on the investment from the opposite ends of Europe, with a partner in Madrid in charge. The bank decided to create its own management team to oversee the renovation, rather than hire a firm experienced in the hotel sector as others had done.

Goldman lacked the connections to easily navigate on-the-ground construction hurdles. It created a hospitality platform in Greece called “Ousia,” which means substance, that would oversee the resorts and help find new hotel investments. It had around 10 employees in Athens, including several with significant experience in the hotel industry.

About a year into Goldman’s investment, delays with permits, construction and engineering started becoming a concern.

Goldman realized it would need more time and money to complete the project. The original plan had been to invest between about €150 million and €200 million. Costs for construction materials and labor increased, eating into the investment’s projected returns.

At one point, Goldman and a construction company it was working with decided to part ways.

Goldman had preliminary discussions for a local partner to help with the work. Around last fall, Goldman began exploring a sale.

The firm sold the hotels in the spring to Sani/Ikos Group, a privately held company that owns and operates hotels in Greece and Spain.

In the end, Goldman decided on a full pullout from hotel investments in the country, with the exception of its minority stake in real-estate investment company Prodea.

Goldman said it evaluates unloading investments when it is in the interest of its clients. “We actively manage all of our investments, maintaining a strong focus on operational discipline and value add,” a spokeswoman said.

The firm’s focus on investment banking and asset management in Greece is otherwise unchanged.

The new owner of the hotels announced a more than €400 million investment in the project. The properties will feature nearly 750 rooms, multiple pools, more than 30 restaurants and bars, theaters and spas.

The hotels are scheduled to open in 2029.

Write to AnnaMaria Andriotis at [email protected]

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