The 2025 edition of the European Hotel Investor Compass survey by Cushman & Wakefield indicates a robust interest of investors in the European hotel sector, with Southern Europe being the most favored investment destination.

A Cushman & Wakefield survey conducted among investors who have collectively invested over €16 billion in hotel assets since 2019 pinpoints the Iberian Peninsula, Italy, and France as Europe’s most attractive hotel investment locations. In particular, Madrid, Barcelona, and Rome are the top investment hotspots.

Moreover, the survey displays strong investor confidence, with 70% of respondents intending to be net buyers in 2025. This surge in confidence is attributed to the declining cost of capital and increasing demand. Italy and the Iberian Peninsula are predicted to witness the most significant hotel price increases, followed by the UK & Ireland and France.

Furthermore, investors’ commitment towards European hotels remains high, as evidenced by 94% of respondents planning to maintain or increase their capital allocation to this sector. The report also notes a two-percentage-point drop in return on equity requirements to 13.6%, reinforcing the optimistic outlook for the sector.

There is a noticeable shift towards value-add opportunities, with more than half (55%) of investors intending to be net buyers in 2025, up from 47% in 2024. Hotels with strong ESG (Environmental, Social, and Governance) credentials are also gaining traction among investors. Properties with top ESG certifications, such as BREEAM Outstanding or LEED Platinum, are expected to command a “green premium,” with investors willing to pay nearly 5% more for these properties.

Despite this optimistic outlook, investors are not oblivious to potential challenges. Rising construction costs are identified as the biggest hurdle, cited by 65% of respondents, followed by geopolitical and macroeconomic risks (44%). However, concerns over financing and yields have eased compared to 2024, thanks to a more favorable interest rate environment.

Download the European Hotel Investor Compass 2025.