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Last Updated:[25-11-2009 07:08:08 EDT] Zoom in Zoom out Back to Tradenews

Bulgarian Hoteliers to Start Own Bank to Tame Credit Crisis

tradenews The Bulgarian hotel owners are all geared up to start their own banking initiative to overcome the high interest rates as rentals and revenues are receding owing to the ongoing economic downturn and other obstacles. According to Sofia News Agency, to strengthen its plans, the hoteliers are in talks for a joint venture with the Bulgarian Construction Chamber, which also announced similar plans to establish their own financial institution.

The President of the Bulgarian Association of Hotel and Restaurant Owners, Blagoy Ragin, said that the only way to deal with the negative effects of the economic crisis was to create a bank of its own. The unique way of funding the hotel industry with its own means is the brainchild of Georgi Shterev, the owner of a Black Sea beach resort in Golden Sands.

The concept was overwhelmingly accepted by all major hoteliers in Bulgaria including owners from the top Bulgarian tourist destinations such as Golden Sands and the other major beach resort Sunny Beach. And that includes the winter resorts of Bansko, Chepelare, Smolyan and Ribaritsa, the SPA centers of Velingrad, and Sandanski, the cities of Sofia, Veliko Tarnovo and Dobrich.

Ragin stated that those who wished to become the members of the new financial institution would have to deposit close to $40,000. The association intends to raise funds of about 8mn as a minimum required capital for this venture. Ragin feels that raising that amount is an achievable target, if just 200 out of the 1000-odd members of the association chipped in for the cause.

The president of the hoteliers’ association informed the funds would be used to buy out the default loans and grant new ones with interest rate 2 percent lower than the commercial banks. He warned that anyone who backed out of the initiative would find themselves isolated and eventually succumb to the crisis.

Since the onset of the global economic crisis the revenues of hotel business in Bulgaria have fallen by about 30 percent, and the recent H1N1 advisories made matters worse for the hotel owners. Besides, they face challenges such as, redundancy and lowered rentals, and the competitive pricing by hotels of the neighbouring Turkey and Greece have even lured away the domestic tourists.

By Jose Roy

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