Milan remains the most sought-after city on the continent, with 55% of investors reporting ‘very high’ interest and an attractiveness index of over 4 out of 5, up +5% on the previous survey. Rome ranks third among European cities (with a score of 4.1), just behind Madrid. Among the 15 most attractive cities are also Italian destinations such as Florence and Venice, cited by investors as additional markets on their radar.
Capital ready for investment. 86% of investors surveyed expect to deploy a volume of capital in 2026 equal to or greater than that of 2025, with an average budget per operator of nearly €200 million. 58% state their intention to increase their allocation, up 2 percentage points from the previous year. 54% of operators position themselves as net buyers, compared with just 7% who expect to be net sellers.
Strategic and opportunistic deals take centre stage. 80% of investors are focusing on value-add transactions (repositioning, moderate capex, market potential), up 9 percentage points, whilst 59% are looking at opportunistic deals. Upper-upscale and upscale properties are the most sought-after (81% of respondents expressed high or very high interest), followed by the luxury segment (69%). City hotels dominate preferences by property type (89%), followed by resorts (62%) and serviced apartments (46%).
Expected returns on the rise. The average return on equity (ROE) required by investors rises to 15.6%, up 2 percentage points compared to 2025, reflecting a context of greater uncertainty in the valuation of transactions despite improved financing conditions. The average loan-to-value (LTV) ratio stands at 51%, a slight increase from 49% the previous year, highlighting the banking sector’s greater willingness to finance hotel investments. For Italy and the Iberian Peninsula, 30% and 27% of investors respectively expect yields to fall during 2026.
Construction costs and geopolitical risks remain the main challenges. 68% of investors identify rising construction costs as the most significant challenge in structuring new deals, followed by geopolitical and macroeconomic risks (53%). In contrast, issues regarding access to credit are in sharp decline (−19 percentage points).
ESG and artificial intelligence among emerging themes. 71% of investors encountered ESG issues during acquisitions or disposals over the last two years, an increase from 67% in the previous survey. 51% of investors expect a premium of between 1% and 5%. The average expected premium for properties with high-level environmental certifications (BREEAM Outstanding, LEED Platinum) stands at 4.3%.
The impact of artificial intelligence is becoming increasingly evident. 81% of investors expect AI to have a significant impact on the hotel industry over the next four years, particularly in the limited-service segment, where standardisation of service is necessary. In fact, 86% of investors expect it to be precisely these (limited-service) hotels that will benefit most from AI, thanks to the reduction in operating costs resulting from technological efficiency. (These hotels have tighter margins and operate with fewer staff, so AI can make a difference in automating check-in, revenue management, dynamic pricing and customer service. In full-service hotels, on the other hand, there is a more structured organisation and the value of the ‘human touch’ is part of the product itself.
Francesco Calia, Head of Hospitality Italy at Cushman & Wakefield, comments: “The result comes as no surprise: it confirms what we observe daily in conversations with our clients. 2025, with €2.5 billion invested in the hotel sector in Italy, has already highlighted the country’s growing importance in the preferences of international investors. We expect 2026 to be even better, underpinned by the solid fundamentals of our hotel market, the strength of tourist flows and the quality of available assets — and by its resilience in an uncertain macroeconomic environment. This is an important signal not only for the hospitality sector, but for the entire property sector in Italy.”
About Hotel Investors Compass
This report aims to help investors navigate the European hotel property market and make more informed decisions. This is the fifth edition, based on a survey conducted among leading hotel investors active in Europe.
The survey was conducted between December 2025 and February 2026. It involved 74 respondents, including senior representatives from leading private equity firms, funds, REITs and other institutional investors.
The firms, represented by respondents who disclosed their identity in the survey (91%), invested a total of nearly €18 billion in European hotels between 2020 and 2025. Over 81% of the investors surveyed indicated that their capital comes from continental Europe, 41% from the Americas, 30% from the MEA region and 22% from the APAC region.
