Cross-border capital fuels hotel investment

Cross-border investment is becoming an increasingly important force in the European hotel market. Institutional investors, private buyers and hotel groups are looking beyond their home countries in search of assets that can deliver steady demand, reliable income and long-term growth.

Hotels were once viewed mainly as cyclical property investments. Their performance could change quickly when travel slowed, operating costs increased or economic conditions weakened.

Today, however, many investors see hotels differently. Well-located properties can attract a broad mix of guests, including holidaymakers, business travellers, conference delegates, event attendees and long-stay visitors.

This shift is helping hotels compete for investment that might once have gone into offices. It is also reinforcing the appeal of established destinations in Southern Europe and major UK gateway cities, particularly London.

Hotels gain a stronger place in property portfolios

The growing interest in hotels reflects a wider rethink across commercial real estate. Hybrid working has reduced demand for some office buildings, while the rising cost of upgrading older properties has added pressure to that sector.

As office investment declined during the recent European property downturn, investors increasingly turned their attention to hotels, residential property and logistics assets.

Hotels offer a different investment model because owners are exposed to both the property itself and the business operating within it. Room prices can be adjusted frequently, allowing revenue to respond more quickly to changes in demand and inflation than income from a long commercial lease.

Many hotels also generate additional income through restaurants, bars, meetings, events, wellness facilities and other services.

That flexibility does not eliminate risk. Hotel performance depends on factors such as location, market positioning, management quality, labour availability and cost control. Demand can also be affected by economic uncertainty, transport disruption and geopolitical events.

As a result, investors must evaluate not only the building but also the strength of the business it supports.

Even so, recent transaction data shows that hospitality is attracting a broader range of investors. According to Savills, European hotel investment reached €21.9 billion in 2024, a five-year high and an increase of 47.6% compared with the previous year. Cross-border investors accounted for €12.9 billion, or 58.6% of the total.

The market remained active in 2025. HVS reported European hotel transactions worth €22.6 billion, the highest annual total since 2019.

While these figures do not remove the risks associated with the sector, they reinforce the view that hotels are becoming an established part of diversified real estate portfolios rather than a niche or short-term investment.

Southern Europe attracts international hotel capital

Spain, Italy and Portugal have become key destinations for hotel investors. Their appeal lies in a combination of mature tourism industries, strong international hotel brands, diverse destinations and opportunities across city, resort, luxury and lifestyle properties.

The region also offers exposure to different types of travel demand. Major cities attract business visitors, conferences and short leisure breaks, while coastal and island destinations benefit from strong resort tourism. Cultural centres welcome visitors for much of the year.

This mix allows investors to spread risk across different markets and travel patterns.

Spain illustrates the strength of investor interest. Hotel investment reached about €4.2 billion in 2025, making it the country’s second-highest annual total on record.

Spain accounted for 18% of all European hotel transaction volume, while hotels represented almost one-quarter of the country’s total real estate investment. Colliers recorded 194 hotel transactions during the year, with resort properties making up 55% of total investment volume.

Italy is also attracting growing attention as international hotel operators expand and investors target cities such as Rome, Milan, Venice and Florence, alongside established leisure destinations.

Portugal offers a smaller market but combines strong tourism appeal with well-known destinations including Lisbon, Porto, the Algarve and Madeira.

Across the wider Southern European property market, research recorded more than €27.4 billion of real estate investment across Spain, Italy and Portugal in 2025, an increase of 19% compared with the previous year.

Despite these positive trends, investors still face important challenges.

Planning restrictions, seasonal demand, rising operating costs and a limited supply of suitable properties can all affect investment decisions. In some locations, restrictions on new development may support the value of existing hotels, but they can also make acquisitions more difficult and expensive.

For that reason, the strongest opportunities are rarely defined by country alone. Investors must assess each property’s location, accessibility, demand patterns, room supply, brand presence and physical condition. A successful tourist destination does not automatically make every hotel a good investment.

London remains a key gateway for hotel investment

London continues to occupy a unique position in the European hotel market. As one of the world’s leading travel destinations and one of Europe’s largest and most liquid real estate markets, it attracts a wide range of international investors.

The city’s visitors include tourists, business travellers, conference delegates, students and people attending major sporting and cultural events. This broad demand supports a wide variety of hotel types, from limited-service and extended-stay properties to internationally recognised luxury hotels.

London’s global profile also gives overseas investors a market that is familiar and relatively easy to understand when entering the UK for the first time.

CBRE’s 2025 European Hotel Investor Intentions Survey ranked London as Europe’s most attractive city for hotel investment for the second consecutive year. Madrid placed second and Rome third, highlighting the continued appeal of both the UK gateway market and Southern Europe.

London is not without its challenges. Property prices are high, suitable assets are limited, and investors must manage staffing costs, energy prices, financing and refurbishment expenses.

Many older hotels also require significant investment to meet modern guest expectations, brand requirements and environmental standards.

These factors make careful asset selection essential. Some investors will prioritise established hotels that provide stable income, while others will focus on renovations, conversions or operational improvements that can increase room rates and profitability.

The broader trend, however, is becoming increasingly clear. Cross-border hotel investment is being driven by growing institutional confidence in hospitality real estate, changing priorities within commercial property portfolios and continued demand for leading European destinations.

Southern Europe offers scale, established tourism markets and a wide range of leisure opportunities. London provides the reach, liquidity and global profile of an international gateway city.

For hotel owners and operators, this flow of capital can support acquisitions, renovations, conversions and brand expansion. For investors, however, the key requirement remains unchanged. A hotel must succeed as both a property investment and a business.

The assets most likely to attract long-term international capital will be those that combine a strong location with dependable demand, disciplined operations and a credible path to sustained value growth.

“Cross-border capital fuels hotel investment” was originally created and published by Hotel Management Network, a GlobalData owned brand.