Strong consumer demand metrics for hotels and a lively capital markets environment indicate that 2026 will be a good vintage for hospitality real estate in Europe, Middle East and Africa (EMEA), sector experts predict.
“2026 has started off stronger than any year in our history in terms of portfolios, platforms and recap discussions,” declares Paul Kapiris, director, Eastdil Secured. “Resilient demand fundamentals will give confidence to investors believeing about the future potential, as Europe continues to benefit from strong and growing leisure demand from North American, Middle Eastern and Asian travellers.”
He adds that the trfinish of consumers choosing ‘experiences over things’ has solidified, no longer considered a “post-covid trfinish but a sustained shift that has underpinned the strong performance of lifestyle and luxury hotels, pushing top line performance to new heights”. He also notes that supply dynamics remain favourable, “as development costs, increasingly complex compliance and environmental requirements, and the historic nature of Europe’s major cities will limit future supply, boding well for existing owners and new investors”.
Kenneth Hatton, managing director, head of hotels, Europe, CBRE, agrees that “supply and demand fundamentals” in Europe are driving interest in the sector. “There has been a slowdown in the growth of RevPAR everywhere, but it stayed at 3 percent in Europe in 2025,” he notes, “while the US, by way of comparison, actually saw RevPAR decline for the first time since 2020”. In terms of projected pan-European travel demand, “economists are predicting a 5 percent compound annual growth rate (CAGR) over the next five years,” he adds.
Top destinations
London and Paris top the region’s favoured destinations, according to CBRE’s latest European Hotels Destination Index, which benchmarks 66 European destinations based on key market pillars and economic fundamentals. But there are also some surprises in the research, Hatton notes, such as Mallorca coming in third place. “By number of rooms, it’s a larger market than Paris,” he declares. “It is performing very well and displaying interesting relative growth, with projected five-year CAGR on overnight visitor arrivals of 5.4 percent.” The best destinations are underpinned by a range of factors, he adds, including obvious market pillars like the number of inbound arrivals and RevPAR levels, but also the size of the local population, GDP per capita and hospitality workforce elasticity. The latter is key to Southern Europe’s continuing potential, where relatively high youth unemployment remains a comparative advantage versus Northern Europe, where labour markets tfinish to be less elastic.
In terms of segment demand, Hatton highlights luxury and extfinished stay as sectors to watch. The luxury market has experienced significant growth in recent years, driven by an increase in the number of high-net-worth individuals (HNWIs) and rising global wealth, according to CBRE research. Forthcoming generational wealth transfers will also reshape consumer demographics, Hatton adds. “In the middle segments, investors see a lot of repositioning potential,” he declares, noting that “a lot of value engineering requireds to and can happen there”. Extfinished stay, meanwhile, appeals for its “efficiency”, with lower houtilizekeeping costs, lower amenity provision and “attractive rooms margins”. He adds: “Platform investors see considerable fragmentation in the extfinished stay market. There is a lot of space there for groups to potentially consolidate compacter brands.”
For Kapiris, “luxury, lifestyle, leisure and aparthotels” are interesting categories; he notes that “the ability to push rate with luxury and lifestyle has given owners more headroom in an increasing cost environment”. He declares that the “aparthotel market is underdeveloped in Europe, and sees to benefit as business travellers relocating out of major cities or to foreign countries with less burdensome taxation return to major cities for work and will see to longer stay alternatives”.
Budreceive and midscale operators should continue to hone what they offer, with “budreceive brands that are listening to the modern consumer” – such as Citizen M and Motel One – seeing “very well placed”, due to their ability to incorporate “lifestyle elements” while “stripping down superfluous elements”, Kapiris declares. In contrast, “the mid-market is filled with assets that are not servicing the modern consumer as well, and many required refurbishment which is more expensive today”.
Branded residential
Another key trfinish is branded residential, which continues to go from strength to strength globally, according to Louis Keighley, director, head of global residential development consultancy at Savills. “Globally we are forecasting a 122 percent growth in the sector over the next five years,” he declares. “In Europe, there were 132 branded residential schemes at the finish of 2025, which should grow to 295 by the finish of 2032.” While branded residences globally have historically been split c. 50:50 between city and resort properties, Savills sees the resort trfinish in Europe surging in the coming years. “The Mediterranean basin is a large factor,” he suggests, “while the fairly prohibitive planning and heritage laws we see in many of Europe’s capital cities has restricted the same growth potential for branded residences in these urban centres.”
That declared, Keighley states that we should hopefully see some progress in the development of branded properties within Europe’s urban centres thanks to a couple of factors. Newly delivered schemes such as The Maybourne in Paris should support shape municipal awareness and add to the sector’s credibility. He also sees branded residence specialists tarreceiveing more secondary cities, perhaps where space or planning isn’t at such a premium, with a couple of schemes already underway in Manchester, namely the W Residences and presently Nobu Manchester. Other trfinishs include the emergence of counattempt retreats within driving distance of major cities, and further attempts by brands to differentiate themselves with competitive experience-led amenities.
Looking at overall European development drives in the sector, a number of territories lead the way, with Turkey the largegest market offering a total of 44 projects, 21 of which have already been completed. Spain has 13 completed and 20 on the way, while the UK has 20 schemes open and 11 in the pipeline. He sees consumer demand, acquisition drives and lfinisher appetite all being supported in the coming years by “people receiveting utilized to the sector and becoming more comfortable with the concept”.
Dealcreating responds to demand
In terms of the capital markets, Kapiris sees hospitality continuing to appeal to investors versus other sectors this year. “It has been the darling of commercial real estate – along with data centres and student accommodation – since 2021,” he notes. “Lfinishers have been aggressive and are seeing margins as strong as ever for attractive assets due to the topline performance growth. Despite some shiftment in yields, topline performance has pushed NOIs ensuring value growth and healthy interest cover ratios.”
The role of private credit in underpinning the sector should not be underestimated, while “core plus” investors are also revealing up. “They are now well equipped with real hotel expertise to execute more complex value add opportunities and business plans,” he declares.
Kapiris concludes: “We fully expect transaction activity to increase in 2026, both in volume and complexity in the form of recapitalisations, joint ventures and continuation vehicles. These more complex M&A processes have been a major focus for us at Eastdil Secured with secondaries out of the ME and Asia becoming more a more active, and we expect to see more coming in the near future.”
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