100 European execs site profitability challenges

EUROPEAN REPORT – Luxury markets face oversupply, significant cost pressures exist from regulatory changes, regional performance reveals disparities, but look for continued investment and expansion in certain European segments and geographies. So says Deloitte’s 2025 European Hotel Industry and Investment Survey.

In an online survey with 100 owners, operators, lenders, developers and investors that took place between August 6 and September 26, 2025, key findings revealed a positive outlook with profitability remaining a challenge. Deloitte said executives have a positive view of the long-term outlook for the European hotel markets, but maintaining or increasing profitability has become the top priority this year. Labor and workforce challenges remain the industry’s number one risk in the year ahead.

Other highlights:

M&A activity cools: The data also points to a possible slowdown in the pace of M&A activity. ‘Growth through acquisitions’ has dropped in the priority ranking this year.

New source of equity focus: when considering source of equity capital for U.K. hotel acquisitions, compared with last year fewer respondents selected ‘private equity’ but ‘family offices’ is expected to see a significant increase in 2026.

Diversification or profit versus capital: When it comes to diversifying, while profit margin pressures and the need to improve ROI are the main drivers, the need for large capital investment is the main barrier.

London and Edinburgh lead investment: In terms of expectations for market performance, in the U.K., established tourist and business hubs continue to attract investment with Edinburgh still the most attractive city for the fifth consecutive year. London remains the most attractive European city for hotel investment in 2026.

Digital transformation and AI surge: There is a fast-growing focus on investing in smart technology and automation both for cost optimization and to better serve guests.