The study found that investors adopted a cautious but strategic approach to the market. Geopolitical uncertainty remained a factor influencing decision-making, while increased liquidity, stabilising inflation and resilient travel demand helped support investment activity.
| Volume and Number of Transactions |
Travel demand continued to underpin the sector throughout the year. European flight activity exceeded 2019 levels, with passenger volumes reaching record highs. Business travel also continued its gradual recovery globally, strengthening weekday demand in major gateway cities.
The macroeconomic environment played an important role in shaping market sentiment. Inflation moved closer to normal levels during the year, supporting real incomes and discretionary travel demand, although services inflation and wage-related cost pressures remained areas of concern for both central banks and hospitality operators.
Monetary policy developments also influenced investor behaviour. The European Central Bank reduced its deposit facility rate from 3.00% in December 2024 to 2.00% by June 2025, maintaining this level through the end of the year. The shift improved debt availability and helped restore confidence among investors.
Economic conditions across Europe remained relatively stable. According to estimates from Eurostat, euro area GDP grew by 1.5% in 2025, while the wider European Union recorded growth of 1.6%. Unemployment stood at 6.2% in December 2025, while private consumption expanded by 1.2% in real terms, supporting domestic and intra-European travel demand.
Demand across the tourism sector remained strong. The European Union recorded a historic 3.08 billion nights in tourist accommodation establishments during 2025. Data from Eurocontrol indicated that European air traffic reached 10.2 million flights during the year, approximately 5% above 2019 levels.
Hotel performance metrics showed a transition from rate-driven recovery to more balanced growth. Revenue per available room growth increasingly reflected higher occupancy levels rather than pricing alone. The gradual return of business travel supported stronger corporate demand in key cities.
Long-haul demand from Mainland China continued to recover but remained below pre-pandemic levels in 2025. Visitor volumes from the Chinese market are expected to return to 2019 levels during 2026. Chinese visitors historically play a significant role in supporting urban luxury hotels and retail districts in cities such as Paris, Milan and London.
Across the Europe, Middle East and Africa region, the hotel investment market recorded 267 transactions in 2025, representing 14.65 billion euros in total volume and 45,052 hotel keys. The average transaction value reached 54.9 million euros, with an average price of 325,000 euros per key.
The upscale segment led investment activity with 132 transactions totalling 7.66 billion euros and an average deal value of 58 million euros. Luxury assets accounted for 34 transactions with a combined value of 3.66 billion euros and an average transaction size of 107.6 million euros . Midscale and economy hotels recorded 101 transactions totalling 3.33 billion euros with an average deal value of 33 million euros .
Development trends across Europe reflect the strong position of the upscale and upper-upscale segments. The upscale category led the development pipeline with 367 projects representing 57,028 rooms at the end of 2025. Upper-upscale hotels reached record levels with 307 projects and 48,969 rooms.
Together, these two segments represent approximately 39% of all projects and 42% of rooms in Europe’s active hotel development pipeline, which totals 1,717 projects and 252,600 rooms.
Construction activity remained strong, with 754 projects representing 115,289 rooms under development by the end of 2025. During the year, 255 new hotels opened across Europe with 30,603 rooms. Forecasts indicate further growth, with 315 hotels expected to open in 2026 and 320 in 2027, although some projects may experience delays due to financing challenges and construction cost pressures.
The United Kingdom led pipeline activity with 274 projects and 39,515 rooms, followed by Germany with 147 projects and 25,616 rooms. London remained the most active development market with 76 projects representing 13,657 rooms.
Investment capital in 2025 was concentrated in Europe’s most liquid and established markets. France and the United Kingdom led both transaction volume and activity, while Spain and Germany formed the second tier of capital concentration.
Resort destinations
Resort destinations displayed a different investment profile, with fewer transactions but higher capital concentration in individual assets. In Spain, Tenerife and Lanzarote recorded notable activity in the upscale and selective luxury segments. Mediterranean destinations such as Vouliagmeni in Greece and Eze in France were characterised by large luxury transactions driven by scarcity and exclusivity.
The five largest single-asset hotel transactions in Europe during 2025 exceeded 1.73 billion euros in total value. These included the Mare Nostrum Resort in Tenerife (432 million euros), Four Seasons Astir Palace in Vouliagmeni (413 million euros), Holiday Inn London Kensington High Street (328 million euros), Pullman Paris Montparnasse (311 million euros) and Hilton Prague (248 million euros).
The report concludes that the European hotel investment market is increasingly characterised by disciplined capital deployment and a preference for high-quality, scalable assets in liquid markets.
Upscale hotels emerged as the core focus of investment activity, attracting nearly half of all transactions and more than half of the total capital deployed. Luxury assets remained attractive but were driven by selective acquisitions, while midscale and economy hotels faced greater operating cost pressures.
France, the United Kingdom, Germany and Spain together accounted for approximately two-thirds of total hotel investment activity, while Paris and London alone represented nearly one-fifth of deployed capital.
The report notes that the European hotel sector continues to evolve as a mature institutional asset class, with investors prioritising assets capable of delivering consistent performance in a market environment shaped by economic and geopolitical uncertainty.
Tags: hotel investment Global Asset Solutions
