Savills forecasts rise in creative deal making in Europe

EUROPE – Savills reports creative deal making will define the European hotel investment market over the next two to three years, as investment volumes rebounded to €23.6 billion in 2025 (+4.8% YoY).

According to the advisor, improved liquidity, more aligned pricing expectations and resilient RevPAR performance (+5.4% vs 2019, inflation‑adjusted) are supporting renewed investor confidence. The report highlights growing appetite for value‑add strategies and expects capital constraints to drive more M&A activity, structured transactions and partnership‑led deals in what it describes as an opportunity‑rich phase for the sector.

Demand continues to prove resilient, high-quality assets are attracting deep pools of global capital, and hotels retain a unique ability to adapt through the cycle. For investors prepared to look beyond near-term noise, this remains a sector that is rich in opportunity.

David Kellett

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Savills predicts that a number of themes will shape the sector over the next two-three years including operational performance, which is emerging as the defining driver of returns, with limited yield‑to‑debt spreads placing greater emphasis on operational excellence and the ability to navigate late‑cycle market conditions. Savills highlights that the gap between average and best‑in‑class operators is widening, positioning operational capability as a core component of investment rationale.

The research indicates that the German hotel market is at a potential inflection point. Despite being Western Europe’s most challenged hotel market after the pandemic, with 2025 RevPAR still 11% below 2019 levels, supply growth is now slowing materially. The strain is most visible in the leased operating model, which is seeing an increase in tenant insolvencies. Taken together, these dynamics create a compelling case for change and opportunities for well capitalized, long-term investors who are willing to support market transition.

Investor appetite continues to favor the flight to quality for prime, irreplaceable assets, with the luxury segment outperforming the wider market. The interplay between luxury hotels and branded residences is also intensifying, with the number of schemes in Europe rising from 18 in 2015 to 62 in 2025 and forecast to double again by 2032.

Major global hotel groups have expanded rapidly, with average brand portfolios growing almost 3x over the past decade alongside a material increase in key money, which reached US$1.2 billion in 2025 across the five largest operators. As market conditions evolve, Savills sees growing potential for a shift from purely asset-light growth towards more aligned “investment-right” models, with selective capital participation and deeper partnerships helping support future expansion.

“The European hotel investment market is entering a phase that demands conviction. While the operating and capital environment is more complex than in previous cycles, the structural fundamentals of travel and hospitality remain highly compelling,” said David Kellett, head of Hotel Capital Markets EMEA at Savills. “Demand continues to prove resilient, high-quality assets are attracting deep pools of global capital, and hotels retain a unique ability to adapt through the cycle. For investors prepared to look beyond near-term noise, this remains a sector that is rich in opportunity.”

Thomas Emanuel, head of Hospitality Thought Leadership, EMEA at Savills, added, “Whether through recapitalizations, platform transactions, lease restructuring, co-investment or partnership-led strategies, the next wave of activity will be shaped by innovation and collaboration rather than purely by price. We are confident in the hotel sector’s ability to deliver durable, risk adjusted returns for those willing to engage thoughtfully and decisively.”