Investor demand pivots towards southern Europe

EUROPEAN REPORT – Southern Europe remains the most attractive market for investors, followed by the UK, Ireland and DACH region, according to new research from Cushman & Wakefield.

In a survey of 60 hotel investors – including senior representatives of major private equity firms, funds, REITs and other institutional investors active in the European hotel real estate market – the research highlighted an improved sentiment towards hotel real estate and a considerable pivot in investor demand towards southern European regions, with the Iberian Peninsula and Italy securing the top spots for hotel investment allure.

The survey participants collectively invested €18 billion in hotels between 2019 and 2023 and have an average fund size of €233 million available for hotel investment in 2024.

The data suggests more capital is on its way with 78% of investors in 2024 planning to deploy the same or more capital than in 2019.

Other highlights:

• 92% of respondents are targeting value-add investment opportunities
• The average return on equity required by investors in 2024 is 15.6%
• 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.
• Resorts (74%) and serviced apartments (59%) are by far the most attractive accommodation types

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.

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.