- Southern Europe Leads Hotel Investment Targets for 2026, with Italy, the Iberian Peninsula and France in the Spotlight
- UK & Ireland Attract Growing Investor Demand, with ‘Very High’ Interest Up 7%
- Key European gateway cities are on investors’ radar, with Milan, Madrid, Rome, London and Paris leading the way
- 15.6% is the average Return on Equity required by hotel investors in 2026 compared to 13.6% in 2025
- Highly sustainable hotel buildings command a 4.3% ‘green premium’ on average
- 81% of investors say AI is expected to shape the industry by 2030 or earlier
Investor confidence in European hotels is projected to remain strong in 2026, with 86% of investors planning to allocate the same or more capital to the sector than they did last year, according to the latest analysis from Cushman & Wakefield.
Following strong performance results in 2025 (RevPAR +3.9%), Southern Europe remains a top target for investors in 2026. Healthy performance, balanced visitor mix, strong growth potential and high liquidity are set to place Italy, the Iberian Peninsula and France as Europe’s most in-demand hotel investment destinations this year, with 78% of investors expressing high or very high interest in both Italy and the Iberian Peninsula, and 60% in France (See table 1). The UK and Ireland will also fare well, with a greater share of investors reporting very high interest compared to last year (+7pp).
The fifth edition of the firm’s European Hotel Investor Compass report also reveals that investors are targeting key European gateway cities, with Milan, Madrid, Rome, London, and Paris identified as the most attractive markets. The survey of major investors, who have collectively deployed over €18 billion in European hotels between 2020 and 2025, also outlines the destinations registering the sharpest rise in interest year-on-year, these included Budapest (+11%), Nice-Cannes (+9%), Berlin (+9%), Munich (+8%), Paris (+7%) and Prague (+7%).
The results suggest investor confidence in the European hotel market remains strong, with 58% of surveyed investors planning to deploy more capital in 2026 than in 2025. A total of 54% of investors intend to be net buyers in 2026, while only 7% expect to be net sellers, up from 5% last year. Interestingly, the strongest intention to increase hotel investment is seen among Value Add (63%) and Opportunistic investors (64%).
Jon Hubbard, Head of Hospitality EMEA at Cushman & Wakefield, said: “European hotel investment is entering 2026 with renewed confidence and clear priorities: deploy more capital but with greater selectivity. Our latest European Hotel Investor Compass shows 86% of investors intend to allocate the same or more capital to the sector this year, with appetite concentrated in proven gateway cities such as Milan, Madrid, and Rome, with growing momentum in the UK & Ireland.
"At the same time, equity return requirements have moved higher, with an average target ROE at 15.6%, up from 13.6% in 2025, likely reflecting the increased underwriting uncertainty not withstanding compressed lending rates.
“What’s striking is how quickly AI is moving from a longer-term theme to an investable value driver with 81% of investors expecting it to significantly shape the sector by 2030. There is an expectation that AI will help reduce operating costs through efficiency gains, and many also see scope to lower distribution costs by accelerating the shift towards direct bookings.”
From Rising Construction Costs to AI Innovation: Future Hotel Investment Trends
The top challenge identified by investors remains rising construction costs with 68% of respondents finding them highly or very highly challenging. Relative to last year, investors are also increasingly concerned about hotel performance uncertainty (up 6% vs. 2025). Conversely, financing issues are less of a concern for investors, down 19% vs. 2025 as debt conditions continue to improve.
Geopolitical and macroeconomic risks ranked as the second most significant challenge among investors. The recent escalation in the Middle East is likely to further amplify these risks on the investment agenda.
Hotels with the strongest ESG credentials continued to command a “green premium”, with investors expecting to pay an average of 4.3% more for properties achieving the highest level of ESG certification such as BREEAM Outstanding or LEED Platinum ratings.
The report also found that AI is poised to have a major impact on the industry. A total of 81% of investors believe AI will significantly shape the sector by 2030, with 86% expecting positive impact on Limited-Service hotels, closely followed by Full-Service properties (85%).
When asked where AI will have the most impact, 80% of investors expect AI to reduce operational costs through efficiency gains, and 65% of investors are optimistic about the impact AI will have on their distribution costs via more direct bookings and less reliance on Online Travel Agents.
Upper Upscale and Upscale are the most appealing hotel segments this year, with 81% of investors reporting high or very high interest, followed by the Luxury segment (69%). Large investors (€200 million available) have expressed significant interest in the latter, with 82% of investors expressing high or very high interest for Luxury hotels.
Notes to Editors
About the hotel investors compass
This report aims to help investors navigate the European hotel real estate market and make more informed decisions. This is the fifth edition, based on a survey of major hotel investors active in Europe.
The survey was conducted between December 2025 and February 2026. It was completed by 74 respondents, including senior representatives of major private equity firms, funds, REITs and other institutional investors.
The companies, represented by respondents who disclosed their identities in the survey (91%), collectively invested nearly EUR 18 billion in European hotels between 2020 and 2025. Over 81% of the surveyed investors indicated that their capital comes from Continental Europe, 41% from Americas, 30% from MEA and 22% from APAC.
