Hospitality Rebound: 2026's Top Markets for Hotel Investment
Executive Summary
Hospitality entered 2026 with a meaningfully better capital backdrop than it had a year earlier. Savills reports that European-focused private real-estate funds raised more than $40 billion in 2025, up 23% year over year, while liquidity improved across both equity and debt markets. That has put hotels back on the buy list.
But this is not a uniform rebound. The strongest performance is concentrated in luxury and ultra-luxury assets, where pricing power remains intact. Across selected major European markets, ultra-luxury RevPAR has increased 57% since 2019, compared with 47% for luxury and 24% for non-luxury hotels. The market is rewarding quality, not just reopening exposure.
Capital Raised In 2025
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European-focused private real-estate funds raised in 2025, according to PERE data cited by Savills
Ultra-Luxury RevPAR Growth
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Growth since 2019 across selected major European markets
EBITDA CAGR Needed
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Growth rate Bain says is now needed to achieve a 20% IRR over a five-year hold
Key Insight
The hotel recovery is now an operating-capability story. Cheap beta has largely gone. In 2026, investors need either prime scarcity or a credible value-add plan that can compound EBITDA.
Flight To Quality Is Driving Returns
Savills is explicit that quality has become the defining transaction theme. Prime real estate, irreplaceable locations, and strong brand-plus-operator combinations are attracting the deepest pools of capital.
| Segment | RevPAR Growth Since 2019 | Investment Read-Through |
|---|---|---|
| Ultra-luxury | 57% | Strongest pricing power and highest competition for trophy assets |
| Luxury | 47% | Still attractive where locations are scarce and brand alignment is strong |
| Non-luxury | 24% | Recovery exists, but margin pressure is much harder to absorb |
The growing role of branded residences reinforces that premium thesis. Savills says the number of luxury branded residential schemes in Europe increased from 18 in 2015 to 62 by the end of 2025 and is forecast to double again by 2032. For developers, that matters because branded residences increasingly help make luxury hotel economics viable.
Why Secondary Markets Still Look Fragile
Germany is the clearest example of the market's split. Savills describes it as the most challenging major hotel market in Europe since Covid. On an inflation-adjusted basis, 2025 RevPAR remained 11% below 2019 levels. Since 2019, room supply increased 9.3%, while a sample of market leases that once showed 1.3x coverage is now in the 0.8x to 0.9x range.
Germany's Hotel Stress Indicators
What makes the market difficult, and potentially interesting, in 2026
That combination has two consequences. It raises distress risk in weaker leased models, and it creates a more credible long-term value-add opportunity for well-capitalised buyers who can restructure leases, upgrade operations, and wait for supply pressure to ease.
What Investors Need To Underwrite Now
Savills quotes Bain's view that "12 is the new 5": roughly 12% EBITDA CAGR is now required to generate a 20% internal rate of return over a five-year hold. That is a radically different playbook from the low-rate era, when cap-rate compression did more of the work.
In practice, that means hotel investors now need to underwrite five things with unusual discipline.
- Brand selection and distribution power.
- Labour cost control.
- Revenue-management sophistication.
- Asset-management intensity.
- Lease structures that align risk with operators.
Important
The middle of the hotel market is not broken, but it is far less forgiving. Assets without pricing power or operational upside are now competing against both higher debt costs and stronger luxury benchmarks.
Sentiment
Hospitality sentiment in 2026 is positive, but selective. Prime and luxury are clearly bullish. Secondary leased markets remain mixed to negative unless the buyer has a restructuring thesis.
That is exactly the kind of market active investors should prefer. Broad optimism has been replaced by differentiated pricing, which creates room for skill to matter again.
Conclusion
Hotels are investable again, but only on 2026 terms. Capital has returned, the travel backdrop remains supportive, and premium assets continue to outperform. At the same time, operational stress in weaker markets has not disappeared. It has simply become more visible.
For investors, the right approach is to own either the best assets or assets with a credible path to become better. Everything in between looks increasingly difficult to justify.