The Hotel Investor Compass, a report by Cushman & Wakefield Hospitality, through its Research division, analyzes the hotel investment situation and trends in Europe. The report includes companies that invested over 18 million euros in 2019-2023.
For those interviewed, Barcelona (4.3 out of 5) and Madrid (4.3) are the two cities with the highest attractiveness for European investment in 2024, leading a ranking followed by Paris (4.1), Rome (4.0) and Lisbon (3.9). In terms of growth, compared to the previous study completed in 2022, the most notable increase in attractiveness for investors was recorded for Barcelona (+10%), Lisbon (+8%), Madrid (+7%), Rome (+6%) and Florence (+4%). In contrast, the largest decrease in attractiveness is found in Edinburgh (-20%) and Istanbul (-31%).
For Albert Grau, partner and co-director of Cushman & Wakefield Hospitality in Spain, "the position of Spain and the Iberian Peninsula as a whole continues to attract investment thanks to the attractiveness and solidity of the destination, both for urban investment and vacation. Although prices are already at healthy levels, there is still potential for appreciation and profitability in line with what investors are looking for. In holiday destinations, we can see more value-add investment opportunities in locations on the second and third lines of the beach for product repositioning, while in urban areas more trophy assets or conversion opportunities from other uses to hotels are sought, in those cities where regulations allow this".
Interest by region, the Iberian Peninsula also tops the ranking
Investors rank the Iberian Peninsula as the hottest region for hotel investment in 2024 with a 4.3 out of 5 overall score, followed by Italy with 4.0 and France with 3.7. This is followed by the United Kingdom and Ireland (3.5), DACH (Germany, Austria and Switzerland) (3.2), and below 3.0, Benelux, Southeast Europe, the Nordic countries and Central and Eastern Europe.
In the opinion of Bruno Hallé, partner and co-head of Cushman & Wakefield Hospitality in Spain, "in holiday destinations in Spain and Portugal, international brands have helped to reposition the destination and provide it with great strength in the international and luxury market, which has a very positive impact on both ADR and asset values. These new luxury holiday hotel concepts have been the main protagonists of value addition in recent years."
Assets with demonstrable ESG criteria increase in value by 5.5%
ESG criteria are already an important part of decisions at the level of real estate investment, from which hotel assets are not excluded. Hotel investors believe that an asset can increase its value by 5.5% if it meets ESG criteria, which can be demonstrated through ESG management certificates such as BREEAM Outstanding or LEED Platinum. 5% of investors consider that this premium can even amount to more than 10%. In short, ESG management is already a must for investors and operators in that it not only impacts the value of assets but also the negotiation of contracts with better returns."
The luxury segment, the investment focus in Europe
53% of investors interviewed believe that the luxury segment is more attractive now than in 2019, the year before the pandemic. This is followed by Upper Upscale and Upscale hotels.
In terms of type and location of establishment, resorts and serviced apartments are the most attractive asset types for investors. When compared to the data from the 2022 survey, urban hotels recorded the strongest increase in attractiveness. About 22% of investors conside urban hotels more attractive, compared to 11% in 2019.
Capital continues to be available for hotel investment
52% of the investors interviewed have between €50 and €200 million to be deployed in acquiring hotel real estate in Europe during 2024. 20% of investors have between 200 and 500 million euros and another 20% are even above 500 million euros. This investment position should support transactional activity, especially in the key target regions such as Spain.
