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Pan-European hotel investment totalled €21.9bn (£18.9m) in 2024, making the highest level since 2019 and a notable 47.6% year-on-year increase, according to Savills’ latest European Hotels Report.
It comes as hotels have been “at the forefront” of the European real estate recovery, and were one of only two commercial real estate asset classes to report an increase in annual volumes and surpass their 10-year annual average in 2024.
The increased portfolio activity led to a resurgence of activity in key European markets last year, and as a result, Savills expects increased transactional activity to continue through 2025.
However, Savills predicts a greater proportion of this to be from large single asset deals rather than portfolios.
According to the property group, the UK hotel market saw investment volumes of €6.8bn (£5.7bn) in 2024, spelling a rise of 157% year-on-year and accounting for 31.1% of total European volumes.
In addition, the UK’s portfolio transactions represented 57.9% of activity, with notable deals including KKR and Baupost’s purchase of the 33-property Marriott portfolio from ADIA for €1.03bn (£900m), and Blackstone’s acquisition of the Village portfolio for €915.8m (£800m).
Following “robust” investment totals in 2022 and 2023, activity in Spain slowed in 2024, with volumes down almost 19% year-on-year at €3.3bn (£2.8bn). However, activity was still 14.2% above the 10-year annual average.
The German hotel investment market is recovering after reaching a turning point last year. Transaction volumes increased 7% year-on-year to €1.32bn (£1.14bn), signalling that the market has bottomed out. This recovery is due to softening debt costs and yield stabilisation in the second half of the year.
Savills notes that several smaller markets, including Italy and the Netherlands, also saw an uptick in volumes, up 102% and 237% respectively year-on-year. Ireland also saw activity return, reporting an increase in transaction volumes from just €150m (£129.6m) in 2023 to €1.24bn (£1.07bn) in 2024.
Finally, cross-border investment dominated in 2024, accounting for 58.6% of transactions. This equated to €12.9bn (£11.1bn), which is an 81.4% year-on-year increase and a 13.8% rise against the 10-year annual average. US private equity activity in particular surged, with the five largest firms – Blackstone, KKR, Baupost Group, Starwood Capital and Oaktree – alone contributing €5.9bn (£5.1bn).
James Bradley, director at Savills Hotels, said: “Rising debt costs and inflation resilience have driven investors toward higher-yielding assets like hotels, tightening the yield gap with offices.
“Since 2019, European leased hotel yields softened by 118bps, less than the 129bps outward shift in office yields across the same markets, reflecting shifting market dynamics and strong hotel demand, especially for leased core assets in prime markets like London and Paris. We expect to see the European hotel market continue to strengthen throughout 2025 and beyond.”
