Spain has surpassed the UK as the market deemed the most attractive destination in Europe for hotel investment. 

Spain surpasses UK as hotel hot spot

Spain Surpasses UK as Hotel Hot Spot

The country saw total hotel investment volumes reach over €4 bn in 2023, accounting for the largest proportion of total commercial real estate volumes in Spain at 36%.

CBRE research suggests after the UK, Italy completes the top three countries and despite experiencing lower trading volumes, hotels accounted for over 20% of the total commercial real estate volume in Italy last year.

Spanish cities also proved popular with respondents polled by the agent. After London, CBRE’s research shows that Madrid has overtaken Paris to become the second most favourable city for hotel investment, with Barcelona also featuring in the top ten. Madrid is proving increasingly attractive to global capital, with notable interest from Latin America.

London ranked number one underpinned by the city’s long-term fundamentals and the highest anticipated levels of inbound travel spend.

According to the report, firms with less than $5 bn AUM globally expect to be the most active, with over half looking to increase their investment activity. In contrast, only 10% of firms with more than $50 bn AUM globally are planning to do the same.

CBRE’s head of hotels for Europe, Kenneth Hatton, said: ‘Hotels have always proven a great inflation hedge, but it’s been the related rising interest rates that have dimmed investment activity in 2023.

Following the year-end forecasts of rate cuts, investors have been eager to deploy into the sector. They see plenty of value-add opportunities and, fundamentally, the long-term projections for tourism numbers in Europe suggest that projected supply levels will be inadequate to satisfy this demand.’

When asked which segment of the market was the most attractive for deploying capital, Upper Upscale and Luxury dominated at 51% and 45% respectively. Both have rebounded quickly following the pandemic and have outperformed the wider hotel market, buoyed by pent-up demand.