Market study of hotel sector in Ile de France

Cushman & Wakefield, the world leader in commercial real estate, presents its new study on the mid-year assessment of hotel investment in the Paris region.

While the market for commoditized commercial real estate investment has continued to suffer since the beginning of the year, the market for hotel investment in Paris and the Paris region showed sustained momentum in the first half of 2024. The total volume of transactions reached nearly €1.2 billion, a relatively stable performance compared to the previous year (-4%) despite a 33% decline in the number of transactions. This performance is explained by four major signatures, representing nearly 80% of the total volume: the Pullman Tour Eiffel, the Hilton Paris Opéra, the Mandarin Oriental and the Hôtel Dame des Arts.

Paris continues to dominate the market, with a concentration of large-scale transactions, particularly in the luxury and upper premium segments, which accounted for 81% of the volume invested in the first half of 2024. Activity remained relatively stable for the midscale and economy categories, which are recording moderate growth.

“After a significant recovery in 2023, yields remained relatively stable in the first half of 2024, with values still supported by growing incomes. However, minor rate compressions were recorded for prime assets in Paris intramural. With the ECB’s interest rate cut in June and an increase in debt liquidity, yield stabilization will continue in the second half of 2024,” comments Joséphine Duforest, Associate Hospitality France.

Thanks to the strength of yields, investing in the Paris and Île-de-France hospitality sector remains a key strategy for investors looking to capitalise on prime assets.

These good results can be explained more broadly by a favourable European context. Indeed, in the first half of 2024, hotel transactions in Europe reached their highest level in five years, according to the latest data from Cushman & Wakefield EMEA. Transactions in the first half increased to over €11.6 billion.

In the second quarter, transaction volumes reached €5.8 billion, almost double the level recorded in the same period last year (€3.0 billion in Q2 2023). Activity was boosted by several iconic hotel transactions, including the sales of the Pullman Paris Tour Eiffel, the Hilton Paris Opéra, the Six Senses London, the Shelbourne Hotel Dublin and the Park Hyatt Zurich. Overall, luxury and upscale hotels accounted for almost half of European volumes in H1 2024.

The UK, Spain and France were the most active markets, representing €7.8 billion in transactions (+62% compared to H1 2023), or more than two-thirds of the European total. London recorded the highest transaction volume by city, with Paris, Dublin, Barcelona and Rome completing the top five. For the full year 2024, volumes are expected to exceed €20 billion, driven by increased debt liquidity and strong hotel performance.

“While economic and geopolitical concerns remain, raised capital needs to be deployed and the hotel real estate sector is gaining traction among investors. The increase in capital allocation to hotels has been driven not only by recent positive performance trends and pricing adjustments, but also by long-term structural changes,” comments Borivoj Vokrinek, Head of Hospitality Research & Strategic Advisory, EMEA.