European Hotel Investor Sentiment 2023

A survey of European hotel investors reveals encouraging findings: most investors plan to deploy the same or greater capital in hotel real estate than they did before the pandemic.

Hotel Investor Acquisition Strategies

Asked "How has your acquisition strategy changed compared to the pre-pandemic period (2019)?", 38% of respondents said they plan to invest more capital, 41% plan to invest roughly the same amount, 14% plan to invest less, and 7% have paused investment activity altogether.

The Role of Discounts for Hotel Investors

Most investors are seeking only modest discounts. When asked "What minimum discount to 2019 pricing levels would you require to consider a new acquisition opportunity?", the responses were: 4% willing to pay a premium, 14% willing to buy at par, 9% requiring a 1–5% discount, 32% requiring 5–10%, 25% requiring 10–15%, 9% requiring 15–20%, 4% requiring 20–25%, and 4% requiring more than 25%.

How COVID-19 Has Shifted Investor Strategy

• 72% of investors view serviced apartments as a more attractive investment type
• 69% of investors view resort properties as a more attractive investment type
• 40% of investors view luxury hotels as a more attractive investment type
• 37% of investors view economy hotels as a more attractive investment type

Challenges Facing Hotel Investors

Rising costs rank among investors' top concerns. When asked "What are the biggest challenges you currently face in closing new deals?", the most common responses were: rising construction costs, rising operating costs, overall inflation, returns, uncertainty around hotel performance, labour shortages, financing, exit (market liquidity), and tenant uncertainty.

Market Recovery Outlook

• 96% of investors expect leisure markets to recover by 2023
• 93% of investors expect regional city markets to recover by 2024
• 88% of investors expect major city markets to recover by 2024

The survey results show that despite the challenges, European investors remain optimistic about the long-term potential of the hotel sector — particularly in the serviced apartment and resort property segments.