Hotel values across Europe grew just 0.2 per cent in 2025, according to consultancy HVS's annual European Hotel Valuation Index (HVI), which tracks four- and five-star assets across 31 European cities. HVS blamed war, US leadership and global instability for the near-flat result, despite record travel demand on the continent.

European tourism recorded three billion overnight stays in 2025, up 2.4 per cent on 2024, with international visitors accounting for half of all stays. Modest rate growth and small occupancy gains lifted top lines, supported largely by leisure travel. Rate cuts from the European Central Bank, which lowered its benchmark from three to two per cent, and from the Bank of England also stimulated hotel growth.

Which markets gained most?

Copenhagen topped the index with 5.9 per cent valuation growth. Strong demand, a slowing supply pipeline and improved airport connections drove the Danish capital to first place.

The rest of the top five:

• Athens: 5.5 per cent, on institutional investor friendliness
• Bucharest: 4.6 per cent, on a strong economy and RevPAR growth
• Madrid: 4.0 per cent, driven by tourism
• Zurich: 3.7 per cent, helped by Swiss franc appreciation

HVS identified the Nordic countries as growth drivers. Eastern Europe gained ground while Western Europe lost a step.

Where did values fall?

Istanbul posted the steepest decline at minus 7.6 per cent, as its luxury affordability positioning weakened amid high inflation, political instability and lira depreciation.

Other laggards:

• Amsterdam: minus 5.9 per cent, after hotel VAT jumped from nine to 21 per cent
• Frankfurt: minus five per cent, on poor RevPAR
• London: minus 3.4 per cent, on higher minimum wages, insurance and property taxes
• Manchester: minus 3.4 per cent, same cost pressures as London

"While overall the HVI showed little movement in values across Europe as a whole, leisure demand continues to boost hotel performance, and therefore values, across Mediterranean markets and in Northern Europe," HVI co-author Margherita Rivetti said. "In Eastern Europe a combination of leisure and corporate demand and more stable inflation have driven hotel values up while in Western Europe there are more mixed results."

What is the outlook for 2026?

HVS expects several factors to support hotel values in 2026: reduced AI disruption relative to 2025 and Europe's continued strength in tourism, with high demand paired against a modest project pipeline.

The report's timing, however, exposes its fragility. HVS completed the research days into the US-Israeli war on Iran, and oil price effects from the conflict could hit the global economy hard. The interest rate cuts of 2025 could be wiped out by inflationary pressure the longer the war continues, and HVS notes some institutions already predict rate hikes. Over-tourism, owner-operator lease viability and high debt costs add further downside risks.

"Europe's appeal to tourists will remain strong, which coupled with its modest project pipeline bodes well for hotel performance," HVI co-author Sophie Perret said. "However, the conflict in the Middle East and subsequent oil disruption could have a severe impact the longer it lasts, particularly on interest rates which will then impact the financing and refinancing of hotel transactions."

For operators and investors, the 2026 monitorables are now oil prices, central bank direction and transaction financing costs. A reversal of the ECB's two per cent rate would directly raise the cost of hotel acquisitions and refinancing across the continent.