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European hotel market is stratifying by boutique, lifestyle and economy models

The tourist industry is booming. Last year, more than 3.1 billion overnight stays were recorded in Europe, while transaction volumes in Europe came to around €23 billion, according to Catella Research. As a result, increased pressure on urban locations, which is leading to predatory competition and prompting investors to broaden their focus to include suburban areas.

In context of global transaction volumes, hotel investments are still in fourth place – after office, residential and retail properties. The most money was invested in the UK last year, at almost €7.7 billion. Germany was in third place at €3.89 billion.

According to Catella Research, three factors are particularly important to investors when making investment decisions: the location, the concept and the operator. Brand hotels still rank highly. However, new types of hotel are entering the market, with established brands developing boutique and lifestyle hotels in order to attract a younger audience for whom authenticity, local flair, individual design and technical facilities play an important role.

For example, Marriott intends to open 14 more hotels under the Moxy brand throughout Europe this year. Accor is planning to open another 50 locations for its lifestyle brand Jo&Joe by 2020. At the same time, there are a growing number of economy hotels that attach importance both to affordable prices and to high quality (e.g. prizeotel).

Prof. Thomas Beyerle, Head of Group Research at Catella, explains:

“A very diverse supply structure has become established in the investment triangle consisting of the location, the concept and the operator. Individual, authentic experiences are becoming an increasingly important focus of travel and are therefore also being incorporated in hotels’ business models. Additional tourism services are finding their way into hotel concepts.”

“This growing experience economy has also benefited alternative offers, especially Airbnb. In London, this accommodation platform currently hosts 60,858 offers. With new campaigns such as ‘Airbnb Plus‘, which incorporates the luxury segment, the pressure on the hotel sector is growing.

“Hotels are already jumping on the bandwagon and offering several functions in one space with mixed use. This can be seen in the booming niche product of serviced apartments. Is the hotel intended to be an ideal place to work, or more of a retreat? This is one of many questions that the hotel sector will have to ask itself in the future.”