Southern Europe Leads Hotel Deals as Investors Bet on Travel Staying Strong

European hotels continue to draw strong investor interest in 2026. Cushman & Wakefield said 86 percent of investors plan to allocate the same amount or more in the sector this year than they did in 2025.

Investors are not ignoring risks. Cost pressure, geopolitical uncertainty, and mixed economic signals are still affecting decision-making. But many buyers continue to view hotels as a good place to deploy capital because travel demand across Europe has remained relatively resilient, especially in destinations with strong international appeal.

Southern Europe and gateway cities are leading investor demand

Southern Europe remains the main focus for hotel investors. Italy and the Iberian Peninsula attracted the strongest interest in the survey, while France also remained one of the top target markets. These countries continue to benefit from strong tourism demand, established hotel markets, and broad international visibility.

Large gateway cities are also drawing the most attention. Milan, Madrid, Rome, London, and Paris ranked as the most attractive markets in the report. These cities appeal to investors because they attract a mix of leisure travelers, business visitors, events, and international air traffic, which helps support more stable hotel demand throughout the year.

Investors still want to buy, but they are becoming more careful

More than half said they expect to be net buyers in 2026, while only a small share expect to be net sellers. That suggests the market is still active and that investors continue to see opportunities, especially in improving older assets or raising hotel performance after acquisition.

At the same time, investors are becoming more disciplined. Cushman & Wakefield said the average return on equity target rose to 15.6 percent from 13.6 percent a year earlier.

Construction costs, uncertainty, and new priorities are shaping the market

The report found that rising construction costs are now one of the biggest challenges. This is important because many hotel deals depend on renovations, upgrades, or repositioning. When building costs rise, it becomes harder to make those plans financially attractive.

Sustainability and AI are also becoming more important. Investors said highly sustainable hotels can command a green premium, while many also believe AI will play a major role in improving efficiency and lowering distribution costs in the years ahead.

The outlook is positive, but 2026 looks more selective

The broader picture remains positive for European hotels. Investors still want exposure to the sector, especially in Southern Europe, major cities, and higher-end segments, such as upscale and luxury hotels. These markets are seen as better placed to protect pricing and deliver stable returns.

Europe’s business travel spending is expected to reach $448.2 billion in 2026, showing that investor optimism is being supported not only by leisure demand, but also by the continued recovery of corporate travel in major European markets.

Photo by Christian Holzinger on Unsplash