Europe's hotel transaction market will not match 2025's deal volume in 2026, according to a CoStar analysis signalling normalization in the continent's hospitality capital-markets calendar.

The CoStar European hospitality research team described 2025 as an "active year" of hotel company deals, with the firm projecting that 2026 will not repeat the same pace. For asset owners, listed hotel groups, private equity sponsors, and lenders operating in Europe, the projection carries weight because transaction comps anchor valuations, refinancing spreads, and consolidation strategies across the sector.

What does the projection mean for hotel operators?

For publicly listed hotel operators, a slower deal calendar reduces the option value of any further portfolio rationalization. Asset disposal programs lose premium-pricing traction when buyer pools contract. Trophy transactions that cleared at premium implied cap rates through 2025 will likely face tighter bidding in 2026.

Groups with active European expansion programs face similar headwinds. Acquisitions priced during the recent deal cycle relied on a deep buyer universe and aggressive debt financing. The 2026 environment, with tighter lender appetite and more selective equity capital, compresses the premium acquirers can pay for new platform deals.

How will private equity and lenders respond?

Private equity sponsors with hospitality exposure face the most acute pressure. Funds nearing typical hold-period exit windows must either accept compressed pricing or extend fund terms, both of which affect limited-partner returns. A slower pipeline extends the marketing period for assets and raises the probability of revised reserve marks.

Bondholders and senior lenders also monitor the transaction pipeline. European hotel refinancing activity in 2026 will price off a smaller comparable-trade set than 2025. Wider bid-ask spreads on single-asset refinancings and CMBS issuance will translate into higher all-in funding costs for owners rolling 2025 maturities into 2026 facilities.

Debt-funded buyers remain constrained by elevated base rates across the eurozone and the United Kingdom. Loan-to-value ratios on prime European hotel assets have compressed relative to the post-pandemic peak. Equity buyers, including sovereign wealth funds and family offices, remain active but more selective in their underwriting.

What should operators prioritize now?

Operators preparing for a slower transaction year should focus on three priorities. First, secure 2026 financing ahead of any further credit-spread widening. Second, accelerate operational efficiency programs to protect gross operating profit margins from labour cost increases across European markets. Third, sequence any further acquisitions into late 2026 or 2027 when competing buyer pools are likely thinner.

The deal slowdown also affects new-build development. Projects that depend on 2026 transaction exits for equity returns may require revised underwriting assumptions. Construction lenders will demand higher pre-leasing thresholds in the absence of a robust take-out market.

What data will confirm the trajectory?

The CoStar signal does not amount to a market collapse. Operating fundamentals across European hotel markets — occupancy, average daily rate, and revenue per available room — remained supportive of debt service through the most recent reporting periods. The 2026 forecast reflects a moderation in capital flows rather than deteriorating operating performance.

CoStar publishes monthly European hotel transaction data through its Capital Markets platform and will release a fuller 2026 European hotel investment outlook in January. Investors should track comparable transaction data from RCA, HVS, and JLL's Hotels & Hospitality Group for confirmation of the slowdown trajectory as Q4 2025 closes and operators finalize 2026 capital plans across the continent.