European Hotel Values See Modest Rise In 2023 But Fail To Reach Pre-Pandemic Levels

Hotel values across Europe remained steady in 2023 buoyed by the consolidation of the post-pandemic recovery and a steady desire to travel keeping average room rates strong, according to the annual European Hotel Valuation Index (HVI) published this week by global hotel consultancy HVS.

These influences combined to off-set the impact of a number of geopolitical challenges including the war in Ukraine, the war between Israel and Hamas and the shaky Chinese economy as well as increasing operating costs and high interest rates.

The result was a modest uplift in hotel values of around 1% across Europe keeping them at approximately 97% of 2019 levels. This slowdown follows steady increases during 2021 and 2022 when the HVI reported value rises of 3.8% and 4.5% respectively.

“Revenue and profit recovery still resulted in marginal gains in value over the year, despite the challenging outlook on valuations parameters,” commented HVS London associate Julia Dzerkach, co-author of the report, “but the elevated cost of debt in the first half of 2023 and the persisting macroeconomic influences have resulted in a subdued market for hotel transactions with a wide bid-ask spread for sales and acquisitions,” she added.

The year saw hotels in Paris, London, Zurich, Amsterdam and Rome remain the most highly valued across Europe with Geneva, Florence, Milan, Barcelona and Madrid completing the top 10.

Hotels in Athens experienced the strongest value growth in 2023, according to the HVI, with double-digit improvement prompted by strong RevPAR [Rooms Revenue per Available Room] and active interest from investors while Florence, Dublin, Brussels, Barcelona, Paris, Madrid and Lisbon saw value increases of between 3-5%. However, only Amsterdam, Athens, Dublin and Paris saw values return to pre-pandemic levels, mostly driven by strong average rate performance.

The German markets of Berlin, Hamburg and Frankfurt were amongst those seeing a decline in hotel values for 2023, largely due to slower recovery of significant demand generators such as corporate business, conferences, exhibitions and fairs.

“There’s still global uncertainty in the year ahead, but we should see more stability in terms of price changes moving forward. The prospect of declines in interest rates coupled with modest RevPAR growth as demand volumes completely recover, should bode well for 2024,” concluded report co-author Clemence Sennavoine, associate, HVS London.

“Over the past few years investors have adopted a ‘wait and see’ approach to hotel investment meaning that substantial amounts of capital remain available and, as has been demonstrated again in 2023, hotels remain a strong investment option as a good hedge against inflation.”