European hotel markets set for three-year resurgence: Savills

Investors are planning to increase their allocation to hospitality real estate according to new research from Savills in which respondents indicated they planned, collectively, to invest €10 billion in the next three years.

According to the Savills European Investor Sentiment Survey 2024, investors will particularly target serviced apartments, lifestyle hotels and mid-market hotels.

The evidence is already mounting and the firm said 2024 investment volumes for European hotels look significantly ahead of last year and are expected to surpass 2023’s numbers “significantly”.

Savills research director Marie Hickey said that demand is in recovery in a number of European hotel markets and there remains significant support for further occupancy growth which will underpin rates and help drive top-line performance.

“While private buyers and owners/operators were particularly active in 2023, and will continue to be so this year, we also expect mid-cap private equity and institutions to make a return in 2024, supported by the relative appeal of the hospitality sector, strong demand fundamentals, operational performance, and the pressure to deploy capital,” Hickey said.

Marie Hickey.

While in 2022 Spain overtook the UK as the largest hotel investment market in Europe, in 2023 the UK returned to a narrow lead having clocked up €2.62 billion of hotel transactions, marginally ahead of Spain’s €2.61 billion in the same year.

Savills stated that this movement was due to a marked increase in UK activity in the final quarter, helped by the reduction in borrowing costs and improved investor sentiment.

More than €1 billion of hotel assets have already changed hands in 2024 which the firm said indicates full year volumes will surpass 2023’s figures.

Richard Dawes.

Reflecting on 2023, Savills’ EMEA hotels team director Richard Dawes said that in the second half of the year investment activity exhibited “promising signs of recovery, marked by consecutive quarterly increases”. Regional volumes rose 20% quarter-on-quarter during Q3, “a noteworthy development given that Q3 traditionally experiences subdued activity”.

Dawes added that the momentum has continued, with stronger Q1 2024 volumes in several key markets across the region.