Hotels

The outlook for the European hotel and tourism sector remains positive, with continued growth expected at a steady pace. While softening domestic U.S. consumer travel demand poses some concerns, strong intra-regional and international demand is projected to sustain positive RevPAR growth through 2025.

Key Takeaways

1. Europe is projected to see higher international tourist arrivals and overnight stays in 2025. The U.S. will remain an important source of hotel demand, though its growth is expected to soften. In contrast, stronger growth momentum is expected from other global markets.
2. RevPAR growth is expected to moderate but remain healthy across markets in Europe. Sustained travel demand will continue to support the sector, although some markets
   in Eastern Europe may face challenges from potential geopolitical tensions.
3. Given favourable demand and supply dynamics, hotels in popular tourism markets such as Greece, France, Italy, and Spain are well-positioned to strengthen occupancy and ADR levels, with steady progression projected through 2025.

2025: Steady growth in international arrivals and overnights stays to bolster hotel performance

The outlook for Europe’s hotel and tourism sector remains optimistic, with a more normalised pace of RevPAR growth. While softening domestic U.S. consumer travel demand often presages an easing of outbound demand (and this factors into CBRE’s projections), intra-European and other global demand are set to support positive RevPAR growth in 2025. 

At the same time, the potential for geopolitical headwinds may affect sentiment and tourism flows. In turn, this could prompt some travellers to shift focus to Northern and Western Europe.

Travel demand remains robust

Airline demand saw significant growth last year. According to the latest projections from the International Air Transport Association (IATA), Europe’s total air passenger numbers are likely to rise by 5.5% year-on-year in 2025, slightly below the ten-year annual average from 2009 to 2019, but approaching a return to the past growth trend.

Additional growth is expected from both global leisure and business travel, making connectivity between cities and source markets even more essential. Travel demand from Asian markets, including mainland China, is expected to fully recover to pre-pandemic levels by the end of 2025.

Moreover, forecast growth rates for inbound overnight arrivals from 2024 to 2026 suggest a promising outlook, with several markets poised to play key roles in driving the continuation of this phenomenon.

Figure 19: Europe hotel performance and economic indicators

Figure 20: Inbound overnight arrivals by country (in million)

As shown in Figure 20, Germany and The Netherlands are among the top performers in terms of relative growth of inbound arrivals, with projected increases of over 20%, partly due to a slower post-pandemic recovery. Greece is also expected to see strong growth in overnight arrivals, underscoring its growing appeal as a popular tourism destination.

France continues to attract the highest numbers of inbound overnight arrivals, with stable projected growth of 3%, suggesting a path toward more sustained long-term growth. The UK shows steady growth projections at 13%, remaining one of the top destinations and adapting to evolving travel demands.

RevPAR growth outlook

Hotel operating performance showed positive growth in 2024, with dynamics varying across cities. While most markets continue to demonstrate resilient growth, a few are experiencing more gradual shifts.

The rapid gains of the past 24 months are likely to slow, but RevPAR growth is expected to remain resilient in 2025, supported by solid demand fundamentals and strategic pricing management. This moderation reflects a natural shift toward balanced growth, underscoring the sector’s ability to adapt and perform well despite potential market challenges.

Balancing growth: shaping sustainable tourism in Europe’s top destinations

Growth in total hotel nights to outpace supply growth

Hotel supply growth in key markets remains below historical trends. While the UK and Germany lead in room count, Ireland and Poland are expected to see a more significant increase in new hotel room pipelines compared to last year.

Greece, France, Spain, and Italy are projected to maintain a favourable balance between supply and demand. These markets are expected to experience relatively low levels of new hotel development, alongside sustained growth in international arrivals and total hotel nights from 2024 to 2029.

Concerns about over-tourism have been mounting in Europe, with cities like Amsterdam, Barcelona, and Venice among the most affected. While municipal authorities across Europe acknowledge the benefits of tourism, they are increasingly aware of the need to balance these benefits with sustainable growth strategies. In the coming years, more cities may implement restrictions on further hotel development, similar to the recent moratorium in Amsterdam.

From an investment perspective, more limited hotel availability should increase the value of existing hotel assets. Additionally, this trend may encourage a shift in tourism demand from traditional hotspots to less crowded destinations, creating new opportunities for investors and hotel operators.

Figure 21: Total hotel nights by country (in million)