Europe investment to ramp up in 2025

INTERNATIONAL REPORT —The Iberian Peninsula, Italy and France are Europe’s most in-demand hotel investment destinations in 2025, according to Cushman & Wakefield’s Hotel Investor Compass survey.

The survey shows that southern European gateway cities are firmly on investors’ radar, with Madrid, Barcelona and Rome identified as the most attractive cities in which to invest, while the cities with the sharpest rise in interest year-over-year are Prague (+14%), Munich (+8%), Milan (4%) and Edinburgh (+4%).

European hotel investment is likely to ramp up in 2025, with significant growth in the proportion of investors planning to deploy at least as much capital, if not more, in the year to come.

Jon Hubbard

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“European hotel investment is likely to ramp up in 2025, with significant growth in the proportion of investors planning to deploy at least as much capital, if not more, in the year to come,” said Jon Hubbard, head of hospitality EMEA at Cushman & Wakefield, said. “Despite the backlash against net zero taking place in many parts of Europe, investors are still prepared to pay a significant premium for sustainable assets. ESG credentials are likely to remain a critical determinant of success in hospitality real estate investment going forward, and as such must be factored into investors’ decision-making.”

The survey of investors, who have collectively deployed over €16 billion since 2019, reveals an expectation that hotel prices will increase in 2025, with the most significant increases in pricing expected to be in Italy and the Iberian Peninsula, followed by the U.K., Ireland and France.

Of those surveyed, 94% plan to allocate the same or more capital toward European hotels in 2025 relative to last year, a 15% increase from last year’s survey. Investors reporting lower return on equity requirements in 2025 underline the increasing confidence in the sector.

The most sought-after investment targets are value-add opportunities. However, investors are also increasingly targeting core and core-plus investments, with these investments up by 14% and 9%, respectively. More than half of investors (55%) plan to be net buyers in 2025, up from 47% last year.

Hotels with the strongest ESG credentials are projected to command a significant “green premium,” with investors expecting to pay nearly 5% more for properties achieving the highest level of ESG certification.

Investor anxieties about financing and yields have decreased since 2024, partly due to a more favorable interest-rate environment. The top challenge identified by investors is now escalating construction costs (65%), followed by geopolitical and macroeconomic risks (44%).