The European hotel market is proving resilient against external pressures. Current analyses indicate continued revenue growth, irrespective of geopolitical uncertainties and persistent inflationary trends. This development is largely driven by robust growth in real household incomes, consistently high occupancy rates, and limited new construction activity in the hotel sector.
Geopolitical events can temporarily affect international tourism. However, these developments are expected to shift demand towards domestic and intra-European travel. This mechanism offsets the volatility of foreign demand. A significant portion of Europe's core hotel markets already benefit from strong domestic demand, particularly in the mid-price segment. The limited supply ensures high occupancy rates, which in turn support revenue growth.
For investors, European hotel properties often offer high stability, as they are frequently acquired with an existing lease structure. This reduces the risk of unforeseen capital expenditure and minimises the strain on hotel investment performance. Leased hotel properties tend to exhibit more stable cash flows and lower yield volatility, leading to a compelling risk-adjusted return profile compared to the average across all property categories.
Opportunities in the Open-Air Hospitality Segment
In addition to the traditional hotel market, alternative forms of open-air hospitality, such as campsites and caravan parks, offer interesting investment opportunities. These segments provide affordable accommodation and, in times of rising consumer spending, represent an attractive option for tourists who might switch from traditional hotels to more cost-effective alternatives. This offers protection against potential value losses in other areas of the tourism market.
The number of campsites in Europe has declined over the last decade, attributable to limited development activities. Italy recorded the sharpest decline in this regard. The lack of fresh capital for often family-run open-air hospitality properties opens up attractive opportunities for professional investors to create significant value through targeted investment programmes and improved operational management in undermanaged properties.
- —Predictable demand: Overnight stays at campsites are generally more predictable than in hotels, which are more influenced by international travel volatility.
- —Improving occupancy: Given an expected continued shrinking supply and stable demand, further improvements in open-air hospitality occupancy are anticipated.
- —Undervalued locations: Targeted investments in undervalued locations offer professional investors the opportunity to generate value.
