European hotel occupancy reached 89% recovery relative to 2019 levels, according to global hotel investment outlook.

As the world continues to find a new normal post-COVID, consumers have placed heightened importance on travel and experiences, which has accelerated lodging demand, and resulted in revenue per available room (RevPAR) reaching or exceeding 2019 levels across Europe. According to JLL Hotels & Hospitality Group’s latest Global Hotels Investment Outlook, even with global inflation and geopolitical tensions, we should expect to see investors deploying capital across a range of lodging verticals to capture an increased share of a travellers’ experience.

The European Outlook: 

Despite the geopolitical and macroeconomic headwinds in the back half of 2022, Europe welcomed almost 70% of the world’s travellers. The region was the front runner in the re-emergence of international travel and opportunities for cross border hotel investment, with hotel occupancy reaching 89% recovery relative to 2019 levels.

While insufficient flight capacity and labour shortages impacted the pace at which international travel recovered, Mediterranean resorts destinations have taken a lead in the recovery, with some of the most popular tourist resort spots in the world, including Spain, Italy, Portugal, and Greece making a strong recovery. Pent-up demand, lifting of travel restrictions during the summer months of 2022, and favourable exchange rates relative to the Euro all drove faster recovery in these destinations.

As we enter 2023, investors should keep a few key themes in mind:

Continued disconnect between accelerating hotel fundamental performance and macroeconomic headwinds. Despite global economic volatility, labour shortages and supply chain disruptions, the global lodging industry was largely boosted by leisure demand and notable international tourism events in 2022. In fact, global hotel occupancy reached 89% recovery relative to 2019 levels. Additionally, unlike other property sectors, hotels can modify their selling rates daily to account for rising inflation. As such, global hotel ADR exceeded global inflation by 70 basis points in 2022. With demand showing no signs of slowing hotel owners can likely push rates even further in some markets with the goal of increasing profitability.

Re-emergence of international travel and opportunities for cross-border hotel investment. An estimated 700 million tourists travelled during the first three quarters of 2022, an increase of 133% compared to the same period in 2021. As travel restrictions continue to ease and international borders reopen, we can expect to see a continued increase in travel demand. With the reopening of borders, European cross border investment opportunities are expected to pick up in 2023, with Europe already gaining $6.85bn in Capital Market inflows in 2022. Asian and Middle Eastern investors will focus on gateway markets in Europe, such as London and Paris.

Other highly sought-after markets in Europe include Zurich, Geneva, Milan, and Rome. In Asia, European investors are more likely to deploy capital into Japan, Singapore, Melbourne, and Sydney. 

Redefining hospitality with a renewed focus on owning the entire travel experience. A focus on work-life balance and authentic travel experiences has led to the emergence of new lodging demand segments as travellers look to spend time in new places. This has created opportunities for investors and hotel brands to expand their offerings into new verticals, such as alternative accommodations, to increase their share of the travel experience. 

Will Duffey, Head of EMEA Hotels and Hospitality Capital Markets said: “Despite the macro-economic downturn, ongoing geopolitical tensions and supply chain disruptions that characterised much of 2022, the European lodging industry has remained resilient. Looking ahead to 2023, Capital Market dislocation and rising debt costs will likely be a concern for investors, however those that remain nimble will be poised to acquire quality assets and grow their portfolios”.

JLL’s Hotels & Hospitality Group has completed more transactions than any other hotels and hospitality real estate advisor over the last five years, totalling $83 billion worldwide. The group’s 350-strong global team in over twenty countries also closed more than 7,350 advisory, valuation and asset management assignments. Our hotel valuation, brokerage, asset management and consultancy services have helped more hotel investors, owners and operators achieve high returns on their assets than any other real estate advisor in the world.