Big Five Markets Poised to Lead Europe’s Hotel Deals in 2025

Hotel investors are set to concentrate heavily on the United Kingdom, France, Germany, Spain and Greece in 2025, as resilient travel demand, constrained room supply and improving financing conditions reshape the competitive landscape for European hospitality assets.

Transaction Volumes Rebound As Capital Flows Back to Hotels

After several years of volatility, Europe’s hotel investment market is entering 2025 with renewed momentum. Industry analyses of 2024 activity point to a sharp rebound in dealmaking, with transaction volumes surging compared with the previous year and signalling a turning point for the sector. The United Kingdom emerged as the most liquid national market by volume, while Spain, France and Germany all featured among the continent’s most active destinations for hotel asset trades.

Data published by specialist advisory firms show that overall European hotel transaction values in 2024 reached their highest level since before the pandemic, even if they remained below the 2019 peak. Single-asset deals in key city markets such as London, Paris, Madrid and Berlin sat alongside large portfolio disposals, underlining the increasing confidence of both core and opportunistic investors. Early 2025 figures indicate that this momentum is being sustained, with hotel assets gaining share within broader commercial real estate investment.

At the same time, investor intentions surveys for 2025 highlight a notable concentration of interest in a handful of “Big Five” markets: the UK, France, Germany, Spain and Italy. Within this group, Spain, France and the UK consistently appear near the top of target lists, while Germany remains a preferred destination for investors seeking scale and long-term income. Greece, though a smaller market by volume, has risen rapidly up the rankings thanks to strong tourism growth and an expanding pipeline of resort-led developments.

This renewed confidence is supported by a combination of macroeconomic stabilisation and sector-specific tailwinds. Inflation has eased from its peak, interest rate expectations are more predictable and lenders are gradually re-engaging with well-located hotel assets, particularly in markets where trading performance has already surpassed pre‑pandemic benchmarks.

Tourism Demand, Events and Air Connectivity Underpin the Upswing

Underlying travel demand is a central driver of the renewed focus on these five markets. Across Europe, international visitor spending is forecast to grow again in 2025, building on an 11 percent rise reported in 2025 for the wider region, with France and Spain among the countries expected to welcome record numbers of tourists. Major leisure destinations along the Mediterranean, urban short-break hotspots and established business hubs are all benefitting from pent-up demand for international travel.

France and Spain in particular continue to capitalise on their dual appeal as both city-break and resort destinations. Paris, Barcelona and Madrid remain flagship gateways for long-haul visitors, while coastal regions from the Costa del Sol to the Balearic and Canary Islands attract resilient holiday traffic. Greece’s islands and mainland resort areas have seen similar dynamics, with strong summer seasons and an extension of the traditional peak period into the shoulder months.

The United Kingdom and Germany, meanwhile, are benefitting from the recovery of corporate and meetings-related travel. London has reasserted itself as one of Europe’s most liquid hotel investment markets, supported by high occupancy levels and robust average daily rates across both luxury and midscale segments. German cities such as Berlin, Munich, Frankfurt and Hamburg are recording improving performance as trade fairs, conferences and large-scale events return to the calendar and international airline capacity continues to normalize.

Improved air connectivity is reinforcing these trends. Airlines have restored, and in some cases expanded, routes into major European gateways and secondary cities, responding to sustained demand from North America, the Middle East and Asia-Pacific. This has strengthened investor conviction that the current upswing in hotel performance is underpinned by structural, rather than purely cyclical, shifts in global travel flows toward Europe.

Supply Constraints and Asset Repositioning Support Pricing

Another factor drawing investors toward the UK, France, Germany, Spain and Greece is the relative scarcity of new hotel supply in many prime locations. Elevated construction costs, tighter planning regimes and lingering financing constraints have slowed the development pipeline across much of Europe. As a result, existing quality assets in established neighbourhoods and resort areas are seeing heightened competition from capital seeking stable, inflation-protected income.

In markets such as London, Paris and key Spanish coastal destinations, the combination of limited new openings and sustained demand is contributing to healthy growth in revenue per available room and, by extension, supporting pricing for income-generating hotels. In Germany, where the economy has been slower to rebound, investors are focusing on opportunities to reposition underperforming leased hotels, convert assets to management or franchise models and upgrade properties to capture higher-yielding segments.

Greece offers a different but complementary story. There, investors are targeting value-add and development plays in resort areas where infrastructure improvements and destination marketing have unlocked new demand. Projects range from the repositioning of legacy beachfront hotels to large-scale integrated resorts and branded residences, often backed by international operators seeking to strengthen their Mediterranean portfolios.

Across all five countries, asset management and repositioning strategies are central to the investment thesis. Many owners are reallocating capital toward energy-efficiency upgrades, digital guest experience enhancements and brand re-flaggings, with the aim of improving operating margins and long-term asset values. This is particularly relevant as travellers increasingly prioritise sustainability credentials and modern design when choosing accommodation.

Financing Conditions, Currency Shifts and Investor Profiles

The financing landscape in 2025 is also playing a role in concentrating activity in these markets. While borrowing costs remain higher than in the years preceding the pandemic, expectations of greater interest rate stability have encouraged lenders to selectively re-open credit lines for hotels in core European destinations. Banks and debt funds are generally more comfortable underwriting loans in markets where depth of demand, liquidity and transparency are greatest, attributes strongly associated with the UK, France, Germany and Spain.

Currency movements are another consideration. Fluctuations in the euro and the British pound against the US dollar and other major currencies are influencing cross-border capital flows, with some non-European investors viewing current exchange rates as an opportunity to enter or expand in these markets at relatively attractive price points. This is contributing to competitive bidding for trophy assets and high-quality portfolios, particularly in London and Paris.

Investor profiles are evolving as well. Institutional players such as pension funds and insurance companies continue to view hotels as a way to diversify real estate allocations, especially when assets are operated under long leases or management agreements with strong brands. At the same time, private equity and sovereign capital are actively seeking opportunities to deploy larger volumes into platforms and portfolios, often using operating partners with specialist hotel expertise.

In Greece and selected Spanish and German markets, there is also growing participation from domestic and regional investors who are leveraging local knowledge to identify emerging locations and redevelopment opportunities. Their activity, combined with international capital, is helping to deepen liquidity beyond the traditional prime city centres and resort hotspots.

Risks, Resilience and the Outlook for 2025

Despite the positive momentum, investors are closely monitoring a series of risks that could affect hotel performance in 2025. Surveys of European hotel owners and lenders highlight concerns around operating costs, wage inflation, energy prices and the potential impact of over-tourism on some destinations. Political uncertainty and regulatory changes, including evolving short-term rental rules and environmental standards, are also part of the risk calculus.

Heatwaves, wildfires and other climate-related events have increasingly disrupted tourism in parts of southern Europe in recent summers, prompting investors to reassess location risks and the resilience of assets in coastal and island settings. In response, many operators and owners in Spain and Greece are accelerating investment in mitigation measures, from upgraded building systems to diversification of source markets and seasonality management.

Even with these headwinds, publicly available forecasts for 2025 generally point to further growth in average daily rates and moderate increases in occupancy for Europe as a whole, with the strongest dynamics concentrated in key leisure-driven and mixed-demand markets. Spain and Greece are expected to remain among the continent’s best performers on the back of sustained tourism inflows, while France stands to benefit from the ongoing after-effects of major events and renewed international attention.

With robust underlying travel demand, constrained new supply and gradually improving financing conditions, the UK, France, Germany, Spain and Greece appear set to dominate European hotel investment activity through 2025. For global capital seeking scale, yield and long-term growth in the region’s hospitality sector, these markets look positioned to remain at the centre of the action.