European Hotel Values Remain Largely Flat

Europe’s hotel assets entered a period of valuation pause

Europe’s hotel market continued to improve operationally, but asset values no longer rose at the pace many investors had hoped for. The HospitalityNet framing that hotel values remain broadly flat across Europe even as room rates and occupancy post modest gains captures the market’s main shift well. Revenue and operating performance are still improving, yet that is no longer enough to drive a strong repricing of assets. HVS’s latest European Hotel Valuation Index showed that hotel values across Europe rose only about 2% in 2024, with that increase supported mainly by lower interest rates, modest RevPAR growth and resilient international travel demand. In other words, the market has moved beyond the post-pandemic rebound phase and into a much more restrained cycle.

Why European hotel values have stopped rising meaningfully

The main reason is the gap between better hotel operations and the cost of capital. Even where occupancy is improving and average rates are moving higher, investors and valuers still have to factor in expensive financing, geopolitical uncertainty, longer transaction timelines and more cautious institutional capital. HVS explicitly said that value growth in 2024 was modest and took place against a backdrop of lower rates and easing inflation, but remained constrained by broader market caution. That means hotels in Europe are performing better than they did in earlier recovery years, but stronger operations are no longer translating automatically into stronger capital value growth.

Occupancy and room rates in Europe are improving, but only modestly

The current phase is defined by moderate improvement rather than a sharp upswing. According to HVS, hotel value growth in 2024 was supported by modest gains in RevPAR, a return by many markets to near pre-pandemic occupancy levels, better food and beverage revenues and a slow recovery in the MICE segment. This matters because it changes how investors interpret market performance. Europe’s hotel sector is no longer rebounding from a shock. It is advancing in smaller, steadier increments. As a result, positive ADR and occupancy trends are now seen less as a trigger for rapid asset repricing and more as proof of operational stability in a tougher financing environment.

Which European hotel markets are performing better than others

Regional flatness does not mean uniform market performance. HVS noted that Paris remained the most expensive hotel market in Europe, followed by London, Zurich, Rome, Florence and Geneva. At the same time, cities such as Lisbon, Madrid and Edinburgh benefited from strong leisure demand and recorded value increases of roughly 6% to 8%. German markets moved more gradually, but still showed gains as corporate demand and trade fair activity recovered. That underlines an important point: Europe no longer has one single hotel valuation story. Resort and leisure-driven destinations are outperforming markets that depend more heavily on business travel and expensive debt.

Geopolitics and capital costs are capping hotel asset valuations

Even with solid tourism demand, hotel real estate remains highly exposed to the broader external environment. HVS said the market in 2024 continued to face pressure from geopolitical events, climate-related disruptions and a wider sense of instability. This matters greatly for hotel valuation because even a strong operating year does not automatically justify a large upward re-rating when investors are building in higher risk premiums and more conservative expectations for future returns. The current valuation pause is therefore not a sign of weak interest in hotels as an asset class. It is a sign that the market needs more durable and more convincing earnings visibility before bidding values materially higher again.

What flat European hotel values mean for investors

For investors, the current setup is mixed. On one side, operating performance is improving and tourism in Europe remains strong, supporting cash flow and sustaining interest in hotel real estate. On the other, asset value growth remains limited, meaning the strategy of making quick gains from repricing is less effective than it was in the immediate post-pandemic period. That makes asset selection much more important. Location quality, branding, management strength and segment exposure matter more than before. Assets in premium leisure locations, leading tourism cities and formats that can serve both leisure and business demand appear the most resilient.

European hotel valuation outlook for 2026

For 2026, the base case for Europe points to continued moderate improvement rather than a sharp jump in valuations. International travel demand, softer inflation and easier monetary conditions than during the peak tightening phase remain positive supports. Even so, hotel value growth is likely to stay uneven and highly dependent on financing costs, pricing power and the pace of corporate travel recovery. That means even if occupancy and ADR continue to move higher, Europe’s hotel real estate market is likely to reprice selectively rather than broadly.

As International Investment experts report, Europe’s hotel market in 2026 is increasingly separating operational success from capital value. Hotels may post higher occupancy, resilient rates and stronger revenue, but investors are no longer willing to pay materially more for every asset by default. In this environment, the winners are hotels with strong positioning, quality management and a clearly defensible demand profile, while the period of rapid value expansion across the wider market has effectively ended.

Georgia’s hotel market remains strong amid limited supply

Against the broader European backdrop, Georgia stands out as a hotel market with resilient tourism demand and still-limited quality supply, especially in the branded segment. TBC Capital said average occupancy in large branded hotels reached 62% in the first nine months of 2025, up 5 percentage points from a year earlier. Occupancy improved particularly strongly in the third quarter, while the country’s branded hotel pipeline remains concentrated mainly in Tbilisi and Batumi. That suggests the market is expanding, but the available stock of quality hotel rooms still does not fully meet demand in the key destinations.

The broader tourism picture also supports the case for a strong market. Galt & Taggart estimated Georgia’s tourism revenues at $4.6 billion in 2025 and expects them to rise to $4.9 billion in 2026. At the same time, Colliers noted that Georgia has now recorded more than 5,000 hotel rooms under construction for 27 consecutive quarters, with around 5,228 rooms active at the end of 2025. That shows developers are trying to expand supply, but the length and persistence of the pipeline also indicate that the country still faces a shortage of modern hotel product relative to demand.