More than 90% of investors and executives intend to maintain or increase their allocation to European hotel assets in 2026, according to CBRE's latest European Hotel Investor Intentions Survey. The figure signals sustained institutional demand despite higher financing costs, geopolitical tension and uneven economic growth across Europe.

The survey marks a shift in how hotels sit within institutional portfolios. Rather than a purely cyclical or opportunistic play, European hotels are increasingly regarded as a core income-generating real estate asset class with long-term structural demand support.

Is 2026 a recovery or a consolidation?

The European hotel investment outlook for 2026 is characterised less by recovery and more by consolidation. While broader commercial real estate continues to adjust to higher financing costs, hotels have held stronger investor interest than structurally challenged sectors such as office. That divergence has reinforced the sector's position within diversified real estate allocations.

Sentiment is not uniform, however. CBRE highlights clear differences in strategy and risk appetite. Core investors continue to prioritise stable income in established gateway cities, while value-add and opportunistic capital increasingly targets repositioning, redevelopment and operational turnaround opportunities.

Where is the capital going?

Investor interest remains concentrated in the major European gateway cities: London, Paris, Madrid and Rome, where liquidity, tourism demand and brand strength are most established. Capital is also gradually expanding into secondary cities and leisure-driven destinations, particularly where pricing dislocations or refurbishment potential offer attractive entry points.

Across strategies, investors show increased preference for:

• assets with clear repositioning potential
• hotels with operational upside through improved management
• branded or platform-led operating models
• properties offering scale and efficiency advantages

This reflects a broader shift towards operationally driven value creation rather than purely asset-based returns.

What is supporting demand?

Four structural factors underpin investor interest.

Resilient travel demand. European tourism has recovered strongly on international arrivals and sustained intra-European travel. Business travel has stabilised at more selective levels, with higher-value trips supporting rate performance.

Income and pricing flexibility. The ability to adjust room rates in response to demand strengthens hotels' appeal where inflationary pressure and slower rent growth affect other asset classes.

Supply constraints in key markets. Higher construction costs, tighter planning regulation and financing constraints limit new development across many core European cities. The constrained pipeline supports occupancy and RevPAR performance in established markets.

Operational evolution. Data-led pricing, digital guest journeys and more efficient labour models are improving margins across well-managed hotel platforms.

What could still hold volumes back?

Higher financing costs remain a key constraint on transaction volumes, even as interest rate volatility has stabilised compared with recent years. The result is a disciplined environment focused on underwriting quality and cash flow resilience.

Other risks identified in the survey include:

• uneven economic growth across European markets
• geopolitical uncertainty affecting travel patterns
• persistent labour cost inflation in hospitality operations
• performance divergence between prime and secondary assets

Investor selectivity is therefore increasing, particularly around location quality, brand strength and operator capability.

What happens next?

CBRE expects European hotel investment to remain a priority allocation for global real estate capital into 2026, but deployment will be disciplined rather than expansionary. Prime assets in established gateway cities will stay highly competitive, while value-add opportunities attract investors seeking enhanced returns through active asset management. The defining theme for the year, the survey indicates, is targeted allocation into a sector whose conviction rests on a longer-term reassessment of its role within institutional portfolios.