Report | Intelligent Investment
European Hotels Destination Index
December 10, 2025 4 Minute Read
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The Index evaluates markets through factors such as international tourism flows, hotel demand, investment penetration and labour costs, as well as the macroeconomic landscape including workforce depth and elasticity, local economic health, and destination affordability.
Leading Destinations
Key Market Pillars and Attributes
Key findings
Macroeconomic Fundamentals
While macroeconomic factors may show weaker direct correlation with hotel investment liquidity and deal flows, they remain critical in shaping a city’s hotel demand profile and operational resilience. These indicators provide broader context around local economic health, local spending power, labour market dynamics, and travel affordability, all of which influence hotel performance and investment viability. In this section, we outline the relevance of these factors and their role in supporting or constraining a city’s attractiveness for sustained hotel investment.
The top 20 markets ranked by economic factors reveal a mix of scale, wealth, and workforce dynamics. London leads overall, supported by population scale and favourable tourism-weighted exchange rates, even if its workforce elasticity is moderate.
Athens, Naples, and Tenerife stand out for high Hospitality Workforce Elasticity (HWE), reflecting the ability to absorb labour into the sector and underlining their tourism-driven economies.
High-income markets such as Dublin, Oslo, Copenhagen, and Amsterdam perform strongly on GDP per capita, offsetting smaller populations with spending power and lower workforce elasticity.
By contrast, Spanish leisure destinations including Malaga, Gran Canaria, and Mallorca achieve high overall scores through strong tourism-weighted exchange-rate positioning and higher HWE, underscoring their reliance on inbound tourism.
Major continental capitals such as Berlin, Vienna, Stockholm, and Paris hold balanced positions, combining solid economic fundamentals, though their workforce elasticity scores are relatively lower.
Overall, the ranking shows a clear divide: northern and wealthier cities benefit from GDP and strength in tourism-weighted exchange rates, while certain southern and leisure-led markets gain advantage from workforce flexibility and tourism dependence.
Defining Attributes of Destination Appeal
While core structural and economic indicators provide a strong foundation for assessing hotel investment attractiveness in a quantitative analysis, certain qualitative or enabling characteristics – to which we refer here as “defining attributes” – also play an influential role in shaping the appeal of a destination.
These defining attributes help explain why some cities succeed in attracting investment or commanding higher rates. They capture the intangible qualities that drive aspirational travel and tourism demand alignment, making them essential considerations in any robust market evaluation of a city by hotel investor. Defining attributes include:
Strategic tourism assets and connectivity define market strength
Qualitative enablers such as natural and cultural resources, infrastructure, and policy prioritisation of tourism are crucial to shape destination appeal and market resilience. Western European markets such as Spain, France, and Italy stand out for their exceptional cultural and natural assets. Notably, Spain ranks highly across all three dimensions, reinforcing its all-rounded strength as a tourism powerhouse.
Meanwhile, air connectivity remains a critical aspect, with London Heathrow, Paris Charles de Gaulle, Amsterdam Schiphol, and Madrid’s Adolfo Suárez topping the region’s busiest airports by passenger traffic in 2024. These global hubs not only serve as major demand generators for gateway cities but also amplify their strategic advantage for international hotel investment and branded hospitality expansion.
Overall Scores
The aggregated scoring of European hotel markets, derived from both structural and economic indicators, highlights a clear relationship between a destination’s intrinsic market depth and its overall investment appeal.
Structural factors such as market size, liquidity, RevPAR, tourism volume, and new supply pipeline demonstrate the strongest correlation in this investment index, indicating their dominant influence on market positioning.
While economic factors, including GDP per capita, HWE, and tourism weighted exchange rate dynamics are considered, their correlation within this Index is comparatively moderate. This suggests that long‑term performance is more closely tied to robust demand fundamentals and established market infrastructure than to short‑term economic conditions.
London and Paris aside, the distribution of scores in the top 20 shows a relatively tight performance band for many destinations, with only a small number of destinations achieving standout scores driven by exceptional scale, liquidity, and demand resilience.
Conclusion
The market fundamentals of supply and demand remain strong for the European hotel sector (when considered in aggregate), underpinned by sustained tourism flows, the return of business travel and disciplined new supply growth.Rather than prescribing where investors should deploy capital, this framework aims to help investors interpret how and why market conditions differ across cities and locations. By understanding these differences, investors can align the destinations that most closely fit their own investment strategies, whether seeking liquidity and stability in established gateways, growth potential in emerging markets, or niche opportunities in leisure and cultural destinations.
