Europe’s environment of constrained supply could present further opportunities for hospitality investors this year, according to sector experts.
Pierre Ricord, head of consultancy - hotels for Europe at Christie & Co, sees an industry torn between taking development risks and preferring other routes to expansion, such as adaptive reuse or converting existing hotels. “Investors focused on the sector have varying degrees of risk appetite,” he notes. “Many are looking for assets that offer an element of safety, such as hotels in central locations in primary markets, which tend to be places that are difficult for ground-up development.” However, with financing costs starting to come down, and trading plateauing in places, he anticipates that some investors may contemplate returning to the development route.
Other owners are attempting to get the most out of existing properties by repositioning upwards to drive “faster cash flows”, he notes. Yet the supply equation remains relatively slow-moving in a number of markets due to an overall lack of distress. “In the UK, for example, using hotels to house refugees has contributed towards the low number of stranded assets in the market.” He suggests that in these cases, the phasing out of government contracts will return mid-market inventory to supply, adding pressure on selective markets and creating a potential capex bubble. “Some owners may opt out, leading to additional investment opportunities.”
Italy is a territory in flux, where its high volume of owner-operated hotels and family-run businesses has typically made it difficult for international flags to penetrate the market. “This is starting to change as international brands and investors are encountering some success in cracking the Italian nut,” Ricord adds. Italy has traditionally focused on the upper end of the market and has fewer properties in the pipeline, with around 7,000 rooms under development, compared to c. 10,000 in France and 20,000 in Spain, he adds. However, the supply landscape may evolve in line with generational shifts, with younger family members not necessarily wanting to stay in and operate the business. “To grow in Italy, you need patience, strategy and boots on the ground,” he adds.
As hotel owners pursue growth, they will also want to consider the mix of services they provide. Ricord notes that while luxury hospitality was traditionally associated with a high level of amenitisation, experience-led trends are driving hotels at all scale levels to think about the services they provide. “We are seeing an opportunity for all segments to deliver an experience, often connected to a sense of place,” he adds, noting that partnering with local communities or inviting neighbourhood artists can be relatively cost-effective ways to add value. “Meanwhile, as staff shortages and inter-sector competitiveness remain an issue for the sector, being able to offer employees a workspace where they get to innovate daily and surprise their customers can add meaningful appeal to hotel jobs.”
Opportunities in hostels
Oliver Winter, CEO and founder of a&o Hostels, says that the group expects to expand further in Europe through the conversion of existing assets. “We have 44 assets in operation and just three of those were ground-up developments,” he notes. “Repurposing buildings has always been a key part of our business plan.” Reuse eschews development risks, saves time and has a positive environmental impact, he notes, with “the favoured option” being the acquisition of an existing hotel, where no change of use permit is required. “As we are a hostel operator, we can usually bring more beds into an existing hotel, and even convert spaces such as convention halls into bedrooms,” he says.
The adaptive reuse of other asset classes also remains an interesting option for the business, which recently acquired a 30,000 sq m office block in Berlin Mitte where it will deliver a 2,500-bed hostel in 2027. “The office was only 25 years old and not outdated, so local authorities didn’t want its owners to demolish the building and replace it with a residential asset,” Winter says. “That was a big advantage for a&o as Berlin city hall preferred our idea to convert it, and delivered a redevelopment permit in just six months, which is incredibly fast for these kinds of processes.”
In terms of a&o’s pan-European growth ambitions, Winter says that the firm has a list of “about 50 cities in Europe where we could grow”, with a top ten hitlist of preferred locations. The Mediterranean basin is a key target, including parts of Italy, Greece, and “growing into Iberia”, he notes. Winter sees Italy as “very interesting demand wise” and notes that opportunity there may arise from the fact that “less than 20 percent of budget hotels are chain owned”.
The luxury route
Billy Skelli-Cohen, CEO of Beaumier, notes that the luxury sector often has to consider a range of complex factors when looking to grow. The five-star group, which targets unique, unspoiled locations, “is not looking to grow in areas where ground-up development is possible”, Skelli-Cohen says. While the group was founded in 2013 as Les Hôtels d'en Haut, a brand that reflected its Alpine heritage, it was renamed Beaumier Hotels in 2021 after expanding to also encompass coastal properties. “We are very much opportunity driven,” he adds, “so whether the next property is on the beach or in the mountains isn’t always decided by us.”
While the group has been in asset-by-asset growth mode in recent times, he says that 2026 could be the year they absorb a hospitality peer. “We feel that we have the capabilities to do a takeover,” he says.
In terms of the kinds of properties the group is looking for, he says they like to “look at existing hotels that already have DNA in the hospitality business”. They would also consider the conversion of a “castle or important residence”, he adds, “as long as it has soul”. A sense of place is a key part of the group’s offering, with Skelli-Cohen noting that the location often does some of the heavy lifting, “offering skiing or a beautiful beach”. Beaumier, in turn, excels in easing access to local resources while offering amenities of its own. “We want people to create their own experience, we don’t give them a schedule,” he says. “We find things to help guide their journey while they stay with us, whether that is organising bike rides through the vineyards of Provence, or private boat adventures in Ibiza.”