Major hotel companies have historically maintained a limited presence in Greece, which also hosts little upscale product, but the country’s hotel and tourism sector is undergoing a transformation.

According to a report by Pavlos Papadimitriou and Themis Trakas, consulting and valuation professionals in HVS International’s Athens office, the 2004 Olympic Games sharpened the world’s focus on Greece, and the positive momentum seems to be continuing. Tourist arrivals have increased from 10 million in 1997 to more than 17 million in 2007, a compounded annual growth rate of 5.7 percent.

International hotel companies like InterContinental Hotels Group Plc, Hilton Hotels Corp. and Marriott International Inc. still have limited presences in Greece. Most of the country’s hotels are independent or family run; only 4 percent are affiliated with a local or international brand. Upscale hotels represent 2.2 percent of properties and 9.7 percent of rooms. But Greece’s high-end hotel market has been growing, and some hotels are achieving high occupancy and room rates, particularly during the summer, the peak tourist season. Additionally, a growing number of Greek hotels are joining international networks like The Leading Hotels of the World, Great Hotels Organisation and Small Luxury Hotels of the World.

Papadimitriou and Trakas reveal that significant investment barriers, such as licensing difficulties and finding large plots of land, exist. But major hotel projects are on the way, some featuring residential components. Near Athens, Starwood Hotels & Resorts Worldwide Inc. plans to convert the Aphrodite to a W hotel by 2010. And Dolphin Capital Investors, a Greece-based investment company that focuses on residential resort developments, is involved in several high-profile luxury developments, including the Kilada Hills Golf Resort and Seascape Hills Resort, both in Peloponnese; Scorpio Bay Resort near Chalkida; and Amanmila Resort on the island of Milos. But the Tourism Enterprise of Messinia S.A. has put in the biggest investment, now constructing the $1.6 billion Navarino Resorts, for which plans include seven hotels, at least three golf courses, several conference centers and villas.