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Key takeaways

The European hotel industry comprises businesses that provide short-term accommodation to business and leisure travellers. In this research, we focused on players with multiple establishments, segmenting the market into (i) hotel chains, (ii) hotel groups, (iii) hotel management services and (iv) serviced apartments.


Following the lows of COVID-19, the European hotel industry experienced a strong rebound with average daily rates (“ADR”) and revenue per available room (“RevPAR”) surpassing pre-pandemic levels. The pace of recovery can be attributed to the release of pent-up travel demand, the pass-through effect of inflation and limited supply growth.


The European hotel landscape is moderately consolidated, as hotel chains represent >40% of the total room supply in the market, while the five largest hotel groups control ~50% of the new hotel development pipeline, consolidation will naturally increase.


Sponsor-led interest has been limited with ~30% of identified assets backed by financial sponsors (May 2023). The serviced apartments segment has the highest proportion of external capital. Investors bet on the underlying demand growth from “bleisure” and experiential travel, as well as strong fundamentals enabled by longer stays and lower level of service required. 


ESG topics in the hotel industry primarily relate to environmental and social issues. Hotels surpass most commercial real estate in terms of CO2 emitted per square metre with executives focusing on energy efficiency, carbon emissions, water conservation and waste reduction. On the social side, improving wages, training and working conditions for lower-wage employees are the most important considerations.

Company benchmarking

Market growth

The European hotel industry is projected to grow from $110.9bn in 2023 to $118.2bn in 2027, registering a 1.6% CAGR during the period (Statista, January 2023)

European Travel Commission (February 2023) estimated that European travel volumes reached ~75% of the pre-pandemic level in 2022. Domestic and international travel is projected to fully recover by 2024 and 2025, respectively

Horwath HTL (March 2019) estimated the total room capacity of European hotel chains at ~2.3m in 2019. Lodging Econometrics (November 2022) expects the capacity to increase by ~59k and ~60k rooms in 2023 and 2024, respectively, broadly in line with the amount added in 2019

Horwath HTL (March 2019) estimated the total room capacity of European hotel chains at ~2.3m in 2019. Lodging Econometrics (November 2022) expects the capacity to increase by ~59k and ~60k rooms in 2023 and 2024, respectively, broadly in line with the amount added in 2019

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Positive drivers

The post-pandemic travel rebound will support the positive ADR and RevPAR momentum. In particular, the release of local pent-up demand is expected to be reinforced by the return of Chinese travellers, while the cost inflation is largely offset by higher room rates (Fitch, April 2023)

The emergence of “bleisure” and “workation” travel will increase the demand for temporary accommodation (JLL, 2023). The hotel operators can capitalise on this by expanding their longer-stay offering and by enriching traditional work travel offering with recreational facilities and partnerships (Forbes, June 2022)

Margin improvement opportunities arise from process automation and digitalisation (Hospitality Net, September 2022). Innovations like self-check-in machines can reduce labour costs for core hotel operations, while the improved level of service could justify price increases (interview by Gain.pro)

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Negative drivers

Staffing shortage will maintain its pressure on margins. As European hoteliers struggle to attract and retain employees, many resort to outsourcing partners, which translates into higher long-term operating costs (CoStar, January 2023).

Permanent decline in corporate travel. In their efforts to cut expenses and improve their ecological footprint, most US and European businesses aim to reduce travel per employee by >10%, translating into ~10-20% less spending in real terms (Deloitte, April 2023)

Growing bargaining power of online distribution parties. The consolidation of the online travel agency and booking market gave enormous leverage to dominant platforms (e.g. Booking.com, Expedia) in dealing with accommodation providers. At the same time, the rise of Airbnb and other peer-to-peer booking platforms diverted the demand away from hotel groups towards individuals and boutique hotels (Hotel Tech Report, May 2022).

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Dive into the Hotels industry industry

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