Luxury Hotels Lead Europe’s 2025 Investments
Following a robust 2024, European hotel investors are heading into 2025 with confidence. CBRE’s annual Hotel Investor Intentions Survey, conducted in late 2024 with 110 key industry stakeholders, reveals that over 90% of respondents plan to maintain or increase their hotel investment allocations this year. Luxury Hotels Lead Europe’s 2025 Investments
While fewer respondents are planning large increases compared to 2024, a larger proportion intends to make smaller incremental increases, driven by steady demand and resilient sector performance. The European hotel investment market in 2024 conveyed a clear message: prime, luxury hotel assets remain not only resilient but increasingly in demand, according to the report by Global Asset Solutions.
Why Hotels? The Case for Continued Capital Inflows
The top reasons for ramping up hotel investment include:
- Optimistic return prospects (29%)
- Expected outperformance relative to other real estate sectors (17%)
- Decreasing debt costs (15%)
Hotels continue to offer compelling supply-demand dynamics, a key factor cited by 50% of investors, while relative yield advantages over other asset classes also remain attractive.
Notably, investors expect minimal pricing discounts, with 55% anticipating either no discount or being willing to bid above asking prices—underlining the sector’s perceived resilience.
Strategy Shift: Value-Add Moves Center Stage
In 2025, value-add strategies dominate investor preferences:
- 66% of respondents favour repositioning and operational improvements.
- Interest in opportunistic investments has declined from 24% to 15%.
- Core strategies see a modest uptick, reflecting a slightly more cautious approach.
Investors are targeting CBDs/gateway cities (65%) and resort locations (66%), though secondary cities are gaining traction, rising from 5% to 12% in attractiveness due to evolving travel patterns and concerns over over-tourism in major hotspots.
Hotels Investors Want in 2025
🔗 Acquisition Preferences:
- Vacant possession (36%) is the top choice, offering flexibility for asset repositioning.
- Hotel Management Agreements and mixed lease structures follow, while fixed and variable leases see minimal interest.
🔖 Branding Approach:
- Independent hotels (40%) are now preferred over soft-branded models.
- Global brands like Marriott, Hilton, and Accor remain attractive (43%), especially in terms of market trust and performance.
💼 Service Levels & Segments:
- Upper-upscale (48%) and luxury (40%) hotels remain the most attractive segments, backed by strong post-pandemic performance and high-net-worth traveller demand.
- Full-service hotels are still dominant (57%), but limited-service hotels are gaining popularity for their leaner operating models (22%).
Risks on the Radar: Labour and Geopolitics
Operating costs are a rising concern. The cost of labour is now seen as the most pressing challenge (35%), followed by:
- Geopolitical risks (25%)
- Renovation/PIP costs (17%)
- Competition from alternative accommodations like short-term rentals (30%)
Interestingly, the cost of capital, once a top concern, has eased significantly, with only 16% viewing it as a major issue in 2025.
Top Investment Markets in 2025
Country Rankings:
- Spain (top spot for the second year)
- Italy (rises above the UK)
- UK & Portugal (tie for third)
- France
- Greece
Emerging markets like Norway, Switzerland, and Denmark are now on the radar, suggesting wider geographical diversification.
City-Level Rankings:
- London (still #1)
- Madrid
- Rome (leaps ahead of Paris)
- Lisbon
- Barcelona
New entries include Athens, Berlin, and Brussels, showcasing renewed investor appetite for both established and evolving urban hubs.
CBRE Outlook: Continued Growth with Caution
- 2024 saw a 37% YoY increase in hotel investment volumes, hitting €20 billion.
- CBRE forecasts a 5%–10% increase in 2025, assuming no major geopolitical disruption.
- The UK led 2024 with 32% of hotel investment activity, followed by Spain (16%), France (14%), and Italy (11%).
CBRE concludes that hotels remain one of the strongest-performing real estate assets in Europe, driven by solid fundamentals and growing investor confidence, even amid shifting global dynamics.
