Cushman & Wakefield expects European hotel investment volumes to reach EUR 27 billion in 2026, driven by a 5.6% rise in tourism demand and investor confidence in a sector where demand continues to run ahead of supply.

The agent's annual European commercial property outlook identifies hotels as the asset class set for stronger performance next year. With demand growth outstripping new openings, C&W anticipates yield compression across the overnight accommodation business — a signal that will sharpen appetite among institutional buyers.

What happened in 2025?

C&W labels 2025 a year of "extraordinary challenges": President Trump's tariffs, recession fears, jumpy equity markets, cooling labour markets, war in Ukraine and conflict in the Middle East. Global GDP still grew an average 3.2%. Inflation generally fell. Unemployment stayed relatively low.

Against that backdrop, European tourism kept expanding as consumers directed more disposable income toward experiences rather than goods. The European Travel Commission expects Chinese visitor numbers to rise 23% in 2026 and Indian inbound arrivals to grow 9%. US arrivals should also increase despite tariff disputes.

Oxford Economics forecasts the 5.6% overall increase in European hotel stays. Warsaw, Athens and Stockholm will see the strongest market growth. Lisbon, Dublin and Edinburgh will post the weakest.

Where do taxes and levies bite?

Local authorities are responding to visitor pressure with higher taxes:

• Brussels plans a 25% increase in its overnight fees.
• Edinburgh will introduce a 5% visitor levy in mid-2026.
• Belgium and the Netherlands are both set to raise VAT on accommodation.
• The Dutch rate will jump from 9% to 21%, a move C&W warns could hit international arrivals as travellers find better value elsewhere.

What does the supply picture look like?

Tighter regulation is also reshaping development. Greater restrictions are coming for short-term rentals, and some destinations are imposing hard limits on new hotel construction. Barcelona has effectively banned new hotel builds — bad news for developers, but good news for existing owners, who gain stronger long-term pricing power.

High construction costs and expensive financing continue to restrain new supply across the continent. Across 17 key European city markets, C&W reckons supply grew an average 2% in 2025, rising to 3.1% in 2026.

Lisbon, Manchester, Budapest and Dublin will see the largest relative inventory increases. Luxury hotels will account for 4.1% of new supply, while extended-stay formats take 11.1% of the pipeline — confirming the segment's outsized weight in European development plans.

For operators and investors, the combination is unusually favourable: demand growth near 6%, supply growth near 3%, rising long-haul arrivals and constrained development pipelines in several gateway cities. The offsetting risks are fiscal — VAT hikes, visitor levies and overnight fees that can erode rate competitiveness at the margin.

Watch the Dutch VAT increase and the Edinburgh levy rollout in mid-2026 as the first test cases of whether tax friction can slow the demand curve that C&W and Oxford Economics expect to keep building through the year.