Vacation Real Estate News
Despite Geopolitical Uncertainty, European Hotel Values Rise
According to HVS' annual Hotel Valuation Index (HVI), hotel values in Europe saw a consistent 2.0% increase in 2024, driven by lower interest rates, modest RevPAR growth, and sustained demand for European travel from international visitors.
The growth in hotel values, with some markets surpassing 2019 levels, was supported by a return to pre-pandemic occupancy rates, improved food and beverage revenues, and a gradual recovery in the MICE segment.
While European hotel performance remained strong and costs stabilized, 2024 presented operators with significant challenges, including major geopolitical events and climate-related disruptions. Despite payroll costs rising above inflation, utility costs gradually decreased, and other costs normalized.
"While cost pressures continue to be a concern for hoteliers, margins have become more secure as inflation has leveled off. Modest RevPAR growth and lower interest rates have also contributed positively to hotel values," noted Tabitha Watkins, HVS London consulting and valuation analyst and co-author of the HVI.
Southern Europe led the way in hotel value growth, with many markets almost fully recovering to 2019 levels. Eastern Europe, although trailing the rest of the region, experienced the second-strongest growth as its recovery gained momentum.
Athens topped the list for value growth, with hotel values rising 11.8%, thanks to affordable prices compared to other European cities, positive RevPAR growth, and ongoing investor interest. Lisbon, Madrid, and Edinburgh followed with value increases ranging from 6% to 8%, driven by a strong influx of leisure visitors. German markets, including Munich, Frankfurt, Berlin, and Hamburg, saw gradual recovery from corporate demand and fairs, with values rising 4.8%, 3.4%, 2.8%, and 0.9%, respectively.
Paris remained the most expensive hotel market in Europe, leading the HVI rankings, followed by London, Zurich, Rome, Florence, and Geneva.
"The continued demand for European travel positions the region as a global tourism hub, with over 50 million additional overnight stays recorded in 2024 compared to 2023, nearly half of which came from international visitors," said Margherita Rivetti, HVS London consulting and valuation analyst and co-author of the report.
However, the HVI cautions that while the outlook for Europe's hotels remains strong, the weakening of the dollar could negatively impact the region, given the U.S.'s role as a key source market, and potential trade tariffs might cause inflation to rise again.
"Additionally, geopolitical shifts, such as the weakening of the transatlantic alliance, could have a significant impact on the hotel industry moving forward," concluded Sophie Perret, HVS London managing director. "The deterioration of long-standing Western alliances adds to the uncertainty."
