The Iberian Peninsula and Italy have emerged as the most sought-after hotel investment destinations in Europe for 2024, according to Cushman & Wakefield's latest sector analysis.
The firm’s Hotel Investor Compass survey canvassed the views of 60 major investors active across the region, who collectively invested €18 bn between 2019 and 2023 in hotels and have an average fund size of €233 mln available for hotel investment in 2024.
The research shows investor demand heavily pivoting towards southern European markets, with the Iberian Peninsula and Italy garnering the highest investment interest scores.
Spain and Portugal’s increased interest is particularly significant, seeing a 17% uptick from 2022. This marks a notable swing from previous years, with UK & Ireland and Benelux both seeing a 10% decrease in interest from 2022, and Nordics losing most popularity with a 14% downturn.
Madrid and Barcelona top the list of cities where investment interest is strongest, followed by Paris and Rome. Contributing to this, Barcelona saw the biggest increase in attractiveness relative to 2022 (+10%), while Lisbon saw an 8% increase and Madrid a 7% rise.
Jon Hubbard, head of hospitality EMEA at Cushman & Wakefield, said: 'Southern European markets have captured the attention of investors due to growing interest in resorts and urban markets with strong tourism appeal, such as Spain and Portugal. This is underpinned by the expected growth of leisure demand in the long term.'
A substantial 78% of the investors surveyed intend to deploy the same or more capital into European hotels this year compared to pre-pandemic 2019 levels.
Value-add opportunities are being aggressively targeted, with 92% of respondents focused on this strategy of acquiring assets requiring repositioning or moderate capital expenditure. Nearly half of investors are planning to be net buyers in 2024.
Findings of the survey also point to the premium investors are expecting hotels with superior ESG credentials. On average, respondents indicated they expect a 5.5% premium versus non-certified properties for those achieving the highest level of ESG certification such as BREEAM Outstanding or LEED Platinum ratings.
Hubbard added: 'ESG is rapidly becoming a critical success factor for hospitality real estate. Not only are investors clearly prepared to pay meaningful premiums for sustainable assets, but nearly 80% have already encountered ESG-related issues impacting hotel transaction processes over the past two years. Factoring this into decisions about this asset class is now essential.'
While investors’ confidence and sentiment are improving, they continue to face constrained access to financing. The share of investors assuming relatively low 50-55% LTV (loan to value) has increased from 27% in 2022 to 47% in 2024, while the share of investors using LTV above 55% has declined.
There is a strong pull towards investment in upscale hotel segments, including luxury and upper-upscale, which are seeing the biggest increases in investor demand versus 2019, 53% and 46% respectively.
When asked about the level of attractiveness of accommodation types, investors indicated that the most attractive were resorts (74%) and serviced apartment (59%) properties.
