Despite a volatile macro backdrop, the European hospitality investment market is showing clear signs of stabilisation and renewed confidence, according to Patrick Saade, head of JLL’s Global Hotel Desk.
“The big trend this year is the fact that real estate is doing better as an asset class, with investors prepared to take more risk to meet their return thresholds,” Saade says, adding: “Hospitality is benefitting from tailwinds around other asset classes.” He names, for example, increasingly “tough regulation on using residential assets for short stays across Europe”, which have helped boost demand for serviced apartments and hostels.
The capital chasing hospitality is also displaying a notable evolution, he adds. Last year’s deal total saw a surge in high-net-worth individuals (HNWI) buying hotel assets, whereas this year, investor types with greater volumes of capital at their disposal are back in play. “Private equity is more active this year, and although core capital is not really back in hospitality, it is back in real estate generally,” he notes. The presence of core capital outbidding private equity on office and retail assets, for example, is another factor focusing private equity funds on hotels.
Deal volumes rising
Hospitality investment volumes in Europe last year reached nearly €22 billion, backed by a surge in portfolio trades, particularly in the UK. The UK accounted for nearly €7 billion of transactions, thanks to deals such as Starwood Capital buying 10 Radisson hotels for £800 million, and Ares Real Estate acquiring 18 hotels from Landsec for £400 million. This year’s volumes and deal distribution looks a little different, however. “Year to date volume has been dominated by single asset trades, although some have been significant, such as Columbia Threadneedle, Bain Capital and QuinSpark’s deal for the Pullman Paris Montparnasse,” Saade says. Representing a total volume of around €312 million, the 957-key property recently underwent a €216 million refurbishment. Another important deal saw the Spring Hotel Group acquire the 1,037-room Mare Nostrum Resort in Tenerife from Brookfield Asset Management for €430 million.
So far, in the first three quarters of the year, total volumes in Europe stand at a little over €15 billion, according to JLL figures, around 3 percent higher than the same period last year. However, year to date, France and Spain are the most significant markets in the European pie, responsible for 17 percent and 16 percent of deals respectively. The UK lies in third place with 14 percent of deals by volume, largely due to the relative absence of portfolio trades, although Saade expects some larger deals to come through in the final quarter.
He also has no doubt that year-end volumes will top 2024. “Confidence is up,” he says. “The environment is conducive to both big ticket and smaller deals, while larger transactions are simpler to finance than they were in the past.”
Macroeconomic complexities
Hospitality’s benign outlook, and the health of its capital markets, somewhat belie what has been a complex year for global business in the face of significant political action. While president Trump’s tariffs have been called inflationary, intelligence is now beginning to emerge showing that their effects may have been delayed. In the second quarter of the year, many US corporations absorbed the impacts of import costs to protect their businesses, making it more likely that firms will have to start passing tariff costs onto consumers from the fourth quarter of the year. Morgan Stanley’s chief economist, Michael Gapen, says that tariffs “have been a tax on capital, so far”.
Setting aside economic contagion from the US, which typically impacts global inflation and therefore interest rates, Europe has also been wrangling with issues of debt and sluggish growth, resulting in difficult government choices. From increases in employer National Insurance Contributions (NICs) and minimum wage hikes in the UK, to elevated sovereign debt scenarios in France, Germany and the UK, Europe’s almost mythical anti-competitiveness paints a sobering picture for entrepreneurship and growth.
Hospitality solutions
And yet a number of hospitality players are navigating a way through the storm in spite of the macroeconomic challenges. Hussein Sunderji, managing director and partner, EQ Group, describes how his business has continued to drive RevPAR growth in its hotels despite 2025 representing a tougher environment. “Over 2022-2023, our cost bases increased as inflation rose, but we were able to pass that on to the guest,” he says. “In 2025, we saw that slow down. Customers are saving more, and trying to find RevPAR growth in a relatively slow market is tougher.”
While the business was concerned that this year’s employer NICs hikes would result in a much bigger wage bill across its UK hotels, EQ has actually navigated its nominal payroll down by 3-5 percent this year. “We have been exploring different ways to boost productivity,” he says, such as “artificial intelligence (AI) tools to automate the back end”, which he says has proved particularly effective in areas such as routines or maintenance.
Another firm achieving outperformance through precision and selectivity is Stoneweg, a private equity player with particular strengths in southern European hospitality. Miguel Casas, managing director of Stoneweg’s hospitality division, says that the firm doesn’t “look so much at real estate cycles, but the relative performance of assets”. He adds: “You may have a hotel in Madrid that is performing well, right next to an asset which isn’t performing at all – mostly due to poor asset management and a lack of capex.” He explains: “We look at micro markets to see what hotels we can buy, not the news cycles.” While Casas does concede that global volatility has perhaps translated into a softening of outbound US traveller volumes, he reasons that it is better to work on pursuing value-add assets that can be transformed with a view to producing long term returns. Those US travellers, in the meantime, have started visiting resorts and destinations including the Balearic and Canary Islands, boosting consistent RevPAR rises in select markets. The recently expanded firm – which now benefits from offices in northern European markets following the Cromwell combine – is also looking at territories which others see as limping along. “We try to be very diversified,” he concludes. “That means Germany has become a buy opportunity, and we are also studying Benelux and France as well.”