Euro investors maintain capital deployment

INTERNATIONAL REPORT — Most European hotel investors (86%) plan to maintain or increase their investment in 2026, and 58% plan to deploy more capital this year, according to the Cushman & Wakefield “European Hotel Investor Compass 2026” report.

The report said Italy is the top target for hotel investment in 2026, followed by the Iberian Peninsula and France. The capital deployment focus for those investors is 80% for value-add deals and 58% for opportunistic. The study reported that the average fund size was nearly €200 million, slightly below the €210 million in last year’s survey. The report said 54% of investors intend to be net buyers in 2026, while only 7% expect to be net sellers, both of which are down year-over-year.

 

Cushman & Wakefield said investors surveyed continue to favor higher-end hotel classes and urban locations, with 81% interested in upper upscale or upscale hotels, and 69% in luxury hotels. Interest in economy hotels is more mixed but still significant. The survey found that 89% of investors are highly interested in urban hotels, with 62% interest in resorts and 46% interest in serviced apartments following behind.

Investors from Asia Pacific expressed the highest interest in urban hotels, while investors from the Middle East and Africa expressed the strongest intention to invest in resorts.

Mediterranean countries remain in favor with investors, with Italy ranking as the most sought-after market for hotel investors in 2026 (up from 2nd last year), followed by the Iberian Peninsula and France. Key cities that drew interest include Milan, Italy; Madrid; Rome; London; and Paris, with increased interest in Budapest, Hungary; Nice-Cannes, France; Berlin; Munich, Germany; and Prague.

The top challenges for investors include rising construction costs, geopolitical and macroeconomic risks. Relative to 2025, the study found that investors are increasingly concerned about hotel performance uncertainty (up 6% YOY). Conversely, financing issues are less of a concern for investors (down 19% vs 2025), as debt conditions continue to improve.

Cushman & Wakefield said on average, investors assume a 51% loan-to-value ratio when underwriting new deals (compared to 49% last year). While the majority of investors expect yields to remain broadly stable across European markets in 2026, 20% of respondents expect compression across the regions on average. On average, investors expect a 15.6% return on equity (ROE) for deals in 2026, an increase from last year (13.6%), potentially reflecting the increased underwriting uncertainty.

The survey also found that ESG issues increasingly affect transactions, with 71% encountering them recently. The average green premium return for highly sustainable hotels is 4.3%, with North American and European investors expecting returns of 5.2% and 4.2%, respectively.

Finally, artificial intelligence is expected to significantly influence the hotel industry by 2030, with 81% anticipating a major impact. Limited-service hotels are expected to benefit the most from AI implementation, according to 86% of surveyed investors, followed closely by full-service properties at 85%.