Chapter 7
Hotels
European Real Estate Market Outlook Mid-Year Review 2025
January 2025 Forecast
Steady growth in inbound arrivals and hotel stays
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.
Mid-year review
- Europe’s international tourist arrivals remain on a positive trajectory, broadly in line with earlier projections. The U.S. continues to be a key source market, with year-to-date monthly arrivals continuing to exceed 2024 and 2019 levels, though stabilisation is expected going forward.
- Total air passenger volumes are forecast to rise by c. 5% year-on-year in 2025, gradually returning to their longer-term growth path. While some regional slowdowns and downside risks remain, overall momentum remains solid, with steady growth anticipated for the remainder of the year. Travel from Mainland China to Europe continues to recover, though a full return to 2019 levels is now expected in 2026, rather than 2025 as previously projected.
January 2025 Forecast
RevPAR growth moderating in key tourism markets
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.
Mid-year review
- Year-to-date 2025 RevPAR across European chain-scale hotels rose by 2.8% year-on-year. Growth was supported by strengthening occupancy in several tourism markets, while ADR increases have become more moderate. Earlier concerns over Eastern Europe have generally eased, with Budapest and Warsaw outperforming in both occupancy and room rates.
- In some markets, the recent stronger uptick in occupancy has been accompanied by what looks like a more measured approach to rate setting, with operators seemingly favouring stable pricing to preserve booking momentum. This suggests a focus on maintaining demand levels, and we expect RevPAR growth across European chain-scale hotels to decelerate from the 2024 level of 7% to still-healthy levels within the range of 2% to 5%.
January 2025 Forecast
Slower growth in aggregate new hotel supply
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.
Mid-year review
- As projected earlier in the year, favourable supply and demand dynamics continue to support growth in key tourism markets, though at a more measured pace. Greece, Italy, Spain, and France have seen further ADR gains at the national level, while occupancy has remained broadly stable compared to the same period last year. This moderation in growth is expected to persist into the second half of the year.
- The UK and Germany have experienced notable downward revisions in hotel development forecasts, with several projects delayed or remaining on hold at the planning stage. Meanwhile, Ireland, Poland, and Portugal are forecast to see supply growth at a CAGR of over 1% between 2024 and 2030 – modest by historical levels, but above the regional average.