European Hospitality Sector Outlook 2024

In recent years, the hotel sector has undergone a tumultuous journey, facing complete closures during the pandemic followed by a robust recovery driven by revenge travel¹. Despite the sector's strong operational rebound, the European hotel investment market has been impacted by unprecedented increases in financing costs and economic and geopolitical challenges . The hotel transaction activity in Europe surpassed €10bn during the first 9 months of 2023, (-10% Y/Y) 26% below the 5-year average (2018-2022). Nevertheless, the decrease in transaction activity has been less pronounced compared to the broader real estate sector which saw an overall decline of 54% in transaction volumes. This resilience can be attributed to various factors, with a key driver being the ongoing trend of investors shifting towards alternative asset classes, benefiting from structural changes in the economy and society. Looking ahead, while the robust fundamentals performance is expected to ease in 2024 amid economic and geopolitical challenges, it is anticipated to endure. Additionally, investment

Country breakdown reveals Spain, France, and Portugal, have witnessed a surge in hotel transaction activity. Investors are especially interested in acquiring resorts and hotels in prominent gateway cities with robust tourism demand, such as Paris, Barcelona, Madrid, and Rome. The primary attraction lies in the flexibility of hotels to enhance income in a higher inflation environment, coupled with the long-term prospects of capitalising on structural shifts. These shifts include a growing population with increased leisure time, technological advancements improving operational efficiencies and transportation, a shift from expenditure on goods to experiences, and the evolving mobile lifestyle, leading to more time spent in transient forms of accommodation.

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Investors are attracted by the flexibility of hotels to enhance income in a higher inflation environment, coupled with the long-term prospects of capitalising on structural shifts.

HOTEL TRANSACTION ACTIVITY ACROSS EUROPE

YTD SEP 2023

activity is projected to gradually increase, particularly in the second half of the year.

VOLUME ( € BN)

COUNTRY

CHANGE VS 2019

CHANGE VS 2022

19%

2.40

92%

SPAIN

2.39

11%

79%

FRANCE

UNITED KINGDOM

1.41

-66%

-52%

0.97

-62%

-25%

GERMANY

0.51

-71%

-24%

ITALY

Source: RCA & C&W Research

4 HOTELS OUTLOOK 2024

THE TIDE IS TURNING AMALGAMATED | 5