European hotel values in 2023 remain steady, HVS finds

Hotel values across Europe have remained steady in 2023, buoyed by the consolidation of post-pandemic recovery and travel, keeping average room rates strong, according to global hotel consultancy HVS’ annual European Hotel Valuation Index (HVI). 

The index has found that these influences have off-set the impact of a number of geopolitical challenges including the war in Ukraine, the war between Israel and Hamas, and the shaky Chinese economy, as well as increasing operating costs and high interest rates.

According to HVS, the result was a “modest” uplift in hotel values of around 1% across Europe, keeping them at approximately 97% of 2019 levels. 

This slowdown follows steady increases during 2021 and 2022 when the HVI reported value rises of 3.8% and 4.5% respectively.

During 2023, hotels in Paris, London, Zurich, Amsterdam and Rome remained the most highly valued across Europe, with Geneva, Florence, Milan, Barcelona and Madrid completing the top 10.

Julia Dzerkach, associate at HVS London, said: “Revenue and profit recovery still resulted in marginal gains in value over the year, despite the challenging outlook on valuations parameters, but the elevated cost of debt in the first half of 2023 and the persisting macroeconomic influences have resulted in a subdued market for hotel transactions with a wide bid-ask spread for sales and acquisitions.”

Clemence Sennavoine, associate at HVS London, added: “There’s still global uncertainty in the year ahead, but we should see more stability in terms of price changes moving forward. The prospect of declines in interest rates coupled with modest RevPAR growth as demand volumes completely recover, should bode well for 2024. 

“Over the past few years investors have adopted a ‘wait and see’ approach to hotel investment, meaning that substantial amounts of capital remain available and, as has been demonstrated again in 2023, hotels remain a strong investment option as a good hedge against inflation.”