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Germany’s hotel investment market is stirring back to life after years of upheaval, but the stakes have never been higher. Investors are stepping back into the sector, lured by improved financing conditions and bold expansion strategies from major brands. Yet, the challenges of rising costs, workforce shortages, and growing regulatory demands loom large, reshaping the industry’s future at every turn.
After months of stagnation, transaction volumes in the hotel sector have surged. In the first nine months of 2024, nearly €1 billion was invested in German hotel real estate—a 73% increase compared to the previous year. While still 50% below the ten-year average, the uptick reflects growing confidence. The third quarter alone saw approximately €450 million in deals, according to Cushman & Wakefield’s Christine Mayer, who noted a "noticeable increase in transaction activity." International investors have been particularly active, accounting for over half of the investment volume. “We are seeing more products come to market, especially in the existing segment, as new hotel construction remains constrained by rising costs and financing difficulties,” explained Alexander Trobitz, Managing Director of Hotel Services at BNP Paribas Real Estate.
Key transactions underscore the sector’s revival. In a landmark deal, Accorinvest sold 30 Ibis Budget hotels to BC Partners Real Estate and Hova Hospitality, marking a significant step in B&B Hotels’ “Road to 400” strategy to operate 400 hotels in Germany and Austria by 2030. Meanwhile, Vivion’s purchase of Berlin’s Femina Palais, including the historic Ellington Hotel, for €64.5 million highlighted investor appetite for iconic assets with repositioning potential. “The pricing process seems almost complete, and interest in hotel real estate is very high,” added Helena Rickmers, Head of Hotel Investment at CBRE Germany.
Big brands Premier Inn and B&B Hotels leading the charge
Brands like Premier Inn and B&B Hotels are leading the charge, albeit with contrasting approaches. Premier Inn’s asset-heavy strategy emphasizes ownership and long-term value creation, with plans to grow from 60 to 300 hotels by 2030. B&B Hotels, on the other hand, relies on an asset-light model to scale rapidly through leasing agreements. These differing strategies showcase the adaptability required in a competitive market. “These are exciting times for B&B Hotels. We have a strong brand that stands for quality, comfort, and affordability, and we are doubling down on these strengths,” said CEO Arno Schwalie.
Challenges, however, remain formidable. Rising energy and labor costs are squeezing margins, while a persistent shortage of skilled workers is forcing many operators to cut services or adopt automation. “Operational efficiencies are becoming critical,” observed Martin Schaffer, Managing Partner at MRP Hotels. Serviced apartments, with their lean cost structures and high occupancy rates, are increasingly attractive to investors and operators alike, offering some respite from these pressures.
Economic uncertainties also cast a long shadow. Inflation and a sluggish economy are dampening consumer spending, particularly in leisure travel. Additionally, ESG requirements are creating new hurdles. Institutional investors and banks are pushing for higher sustainability standards, but many operators—particularly smaller ones—are struggling to meet these expectations. “ESG compliance is no longer optional; it’s essential for avoiding stranded assets and ensuring long-term profitability,” added Schaffer. Smaller players have voiced concerns over the costs of compliance, emphasizing the need for owner-operator collaboration to achieve meaningful progress.
Achat insolvency highlights risks in the sector
The insolvency of the Achat hotel group has also highlighted risks inherent in asset-light models. “A hotel insolvency always has consequences for the owners,” explained Clemens Engelhardt, a lawyer specializing in real estate. With many operators reliant on long-term leases, landlords face significant legal and financial challenges. “The filing of an insolvency petition marks a critical juncture, and landlords must carefully evaluate whether to terminate leases or renegotiate terms,” Engelhardt added.
Despite these headwinds, the outlook is cautiously optimistic. The European Central Bank’s recent interest rate cuts have improved liquidity, making financing more accessible and boosting investor confidence. Transaction volumes for 2024 are expected to reach €1.5 billion, up from €1.3 billion in 2023. As the market evolves, the ability to adapt and innovate will be key. Whether through strategic repositioning of iconic assets or embracing operational efficiencies, the next chapter of Germany’s hotel investment story will depend on the resilience and ingenuity of its players.
