Martin Edsinger, Senior Vice President of KSL Capital Partners – We are waiting for a good opportunity to invest in Serbia

(Martin Edsinger) The Adria Hotel Forum, held on February 20-21 in Belgrade, brought together the most important names from the hotel industry. Considering the increasingly frequent announcements of a new global economic crisis, the participants primarily tried to answer the question: “Is the Future Bright?” However, as this is primarily an investment conference, it was much more pertinent to hear how interested foreign investors are when it comes to investments in Southeast Europe.

We talked about the investment climate in Serbia and the countries of the region with Martin Edsinger, the Senior Vice President of the US-based fund KSL Capital Partners, which primarily invests in tourism and tourist projects. This was Edsinger's first time in Belgrade and at the Adria Hotel Forum. As he says in his interview with eKapija, he didn’t know what to expect.

– However, my first impressions are positive indeed. There are lots of people that are interested in doing business and a lot of people that are interested to have a company like mine come here put some investments into this region, not just Serbia, but the whole region. So we are trying to do our best here, we are trying to meet with local people and trying to meet with local partners and so far it’s been a success.

eKapija: Do you already have any projects in Serbia? If not, do you plan to have any?

– No, we don’t have any projects in Serbia just yet. We are a US fund initially, the fund has grown from the US into the UK, now into Central Europe and eventually we will look to do deals a bit more in the East Europe. So what I’m here for is to understand more about the market and to see the opportunities to do deals in places like Serbia but also Croatia and other countries, so we are working on it and hopefully we are getting a deal done in this region in the next year or two and then hopefully we can grow.

eKapija: What can you say about the investment climate in Serbia? Is Serbia attractive for investments?

– Of course, we invest into tourism businesses only, so, we look where the consumers are coming from, trying to understand what the goals and terms of the travel are internationally and as I said we tried to spend more time in Croatia because of the coastal line, as a lot of people are trying to spend the vacation there. And we come to Serbia to this beautiful city but there is also a business and corporate part of it and that’s travel pattern we are bit less familiar with and we are trying to learn more about it and when that happens we can understand the local market better and we will try to understand where to make our investments but, as of now, Serbia and particularly Belgrade the sizes of hospitality businesses and the size of the opportunity to see here is very small and we are looking to invest larger pieces of capital.

eKapija: Which kind of projects are you interested in? Do you want to build new hotels or to find old hotels and renovate them?

– We are privately established fund and that means that we are looking to find some sort of business with an operating mode today and then we can look at it and say how we can improve this and if we think about hotel business, if we find a beautiful hotel in Belgrade, beautiful hotel portfolio, which has great business but maybe lacks capital and needs to be refurbished or needs to be repositioned, rebranded and better operated we brand it and keep operating it as it is implemented. So what we look for is typically existing businesses. The situation with green fields it is little bit difficult to us particularly in this part of the world.

eKapija: Have you already found something interesting here?

– No, the benefit of coming into place like this is to get an idea about the place, to talk to people, and test ideas. I saw yesterday a few people presenting some interesting opportunities and we were trying to understand how to do businesses here.

eKapija: What are the advantages and the disadvantages of this region?

– The advantage is it’s a growing region and it’s growing historically because obviously you had war here. In Croatia, for instance, they only started to recover in 2002, and only in the past 3-4 years has there really been progress. Serbia is slightly behind Croatia but that means that you are growing from an apparently low base and the interest in this part of the world for tourism and business will continue to grow because you are few years behind because of historical reasons so the growth is very attractive.

On the negative side there’s more risk and the risks are around uncertainty how to do the business here. This pertains to how we can get the planning permission we want, how the labor law work here, who will eventually buy our hotels when we want to sell them, so the uncertainty is greater, which means that the price that you pay on the capital rate is also reflected, evaluation is smaller. Another negative side is that the market is not so big yet, it’s very fragmented, a lot of small businesses so if you look to invest a large part of capital or a large equity check the opportunities are very few in this part of the world, so, eventually we hope that the market will be more consolidated which means that we can invest and we can deploy a larger equity check in the market.

(Martin Edsinger) eKapija: What can Serbia and other countries from this region do to attract investors?

– I was speaking to some politicians yesterday and I would say that the rule of law is very important and I would say that the rule of law is making sure that there are no surprises to investors. For example, when buying a hotel, if you can actually know that the hotel is owned and the title of the hotel is good that is very important, to know that there wouldn’t be unexpected issues about the labor and you can work strictly with local government here on the permission and that the people are accommodating the hotel growing business and to keep tax rates and that law is not changing that much.

What you want is that the investor has certainty for at least 5-10 years. In Croatia the certainty has been there for some time but in 2017 for instance there was this scandal with Agrokor that was going public and it was a big issue subsequently the impact hit the stock exchange, so, as long as there is any corruption in these countries foreign investors will be very hesitant. The second point is infrastructure, making sure that people can come here and experience it. Get those two things right in a period of time and investments will come.

eKapija: The main topic of this conference is “Is the future bright?”. In your opinion is it bright or not?

– Yes, it is of course bright. Travel and tourism is growing about 5% per year roughly and is expected to continue growing. People will always want to travel and experience new things, so that’s great for the investors. In Eastern Europe the growth will be even higher, and investments in this growing region will improve the experience for tourists and guests, which is also very good for us.

The negative things which people are talking about are greater political issues, fear of fraud. Now we have this great war between the US and China. Political risks also have an impact on interest rates, the debt levels are very high, people are expecting some sort of adjustment. So I would say there are some risks but in the long term the future is very bright.

eKapija: When can we expect KSL Capital Partners to arrive to Serbia?

– I am looking forward to coming back to this conference every year and spending some time here. As I said, when the first investment opportunity appears, we will come. We hope this will be very soon.

D. Obradovic

KSL Capital Partners

Martin Edsinger

Adria Hotel Forum

hotel investment conference

investments in tourism in Serbia

attracting hotel investments in Serbia

hotel investments in Serbia