2023 HVS Report: Modest Growth in European Hotel Values Despite Challenges from Ukraine Conflict and Global Economic Tensions

Monday, March 11, 2024

In 2023, European hotel values remained stable, supported by the ongoing recovery following the pandemic and a consistent interest in travel that maintained solid average room rates. This stability was highlighted in the annual European Hotel Valuation Index (HVI) released this week by HVS, a global hotel consultancy.

Despite facing several geopolitical challenges, such as the conflict in Ukraine, tensions between Israel and Hamas, uncertainties in the Chinese economy, alongside rising operating costs and elevated interest rates, these factors were effectively balanced.

Consequently, hotel values in Europe experienced a slight increase of about 1%, maintaining values close to 97% of those in 2019. This modest growth marks a deceleration from the steady gains observed in 2021 and 2022, where the HVI noted increases 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.

Throughout the year, Paris, London, Zurich, Amsterdam, and Rome retained their positions as the most highly valued hotel markets in Europe, followed by Geneva, Florence, Milan, Barcelona, and Madrid rounding out the top 10.

Athens stood out for having the most significant increase in hotel value in 2023, as reported by the HVI. This was fueled by a notable rise in RevPAR [Rooms Revenue per Available Room] and keen interest from investors, leading to a double-digit improvement. Meanwhile, cities such as Florence, Dublin, Brussels, Barcelona, Paris, Madrid, and Lisbon experienced value growth ranging from 3-5%. However, only Amsterdam, Athens, Dublin, and Paris managed to see their hotel values recover to pre-pandemic figures, primarily thanks to a robust average rate performance.

Conversely, German cities like Berlin, Hamburg, and Frankfurt witnessed declines in hotel values during 2023. This downturn was mainly attributed to a slower recuperation in major demand drivers, including corporate business and the hosting of 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.” 

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