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Motel One Upper West, Berlin
Germany's hotel market remains open for business in 2026. At the halfway stage, overnight stays are edging higher, investment transactions continue to take place and financing remains available for the right assets. Yet this apparent resilience disguises a market that has become far more discriminating, with profitability under pressure and a widening divide between prime hotels and almost everything else.
Many of these themes were explored during a recent webinar hosted by hotel consultancy mrp hotels. While the discussion provides the starting point for this assessment, transaction data, brokerage research and recent market developments largely support that conclusion. Capital and operator demand remain available, but only where location, product quality, sponsor strength and lease structure meet increasingly demanding standards. Prime city-centre properties with established operators continue to attract interest, secure financing and command strong rents. Secondary locations, peripheral assets, hotels burdened by legacy leases and operators with weak balance sheets face a much harder environment. That distinction surfaced repeatedly throughout the webinar and is borne out by wider market evidence.
Overnight stays in Germany increased by 1.4% during the first five months of 2026, compared with growth of 2.4% in Austria. The figures are positive but conceal considerable regional variation. North Rhine-Westphalia recorded growth of 5%, supported by Düsseldorf and Cologne, where trade fairs helped lift overnight stays by around 10%. Bavaria, Baden-Württemberg, Hamburg and Munich were broadly flat, while Berlin recorded a decline of around 3%.
Vienna performed more strongly, with overnight stays rising by around 5%. US visitor numbers increased by 11%, while guests from Saudi Arabia and the United Arab Emirates also continued to grow despite the conflict involving Iran.
Higher occupancy fails to ease pressure on margins
The larger operational challenge, however, is not occupancy but profitability.
Across approximately 20 hotels in Germany, Austria and Switzerland analysed by mrp hotels, occupancy increased slightly during the first half of the year, but room rates showed little corresponding movement. Revenue growth therefore came mainly through higher volumes rather than pricing, while gross operating profit declined compared with the same period last year.
Hannah Struck of mrp hotels said operators were finding it increasingly difficult to pass higher labour, energy and financing costs through to room rates. Booking windows have shortened markedly since the pandemic, making price increases riskier and leaving operators to absorb a growing share of cost inflation.
Digitisation and artificial intelligence are beginning to provide some relief. AI-supported staff scheduling, food-waste management and automated check-in can lower operating costs, but implementation remains uneven, particularly within larger hotel groups. Technology is helping operators protect margins, although not yet at a scale sufficient to offset the full increase in costs.
Evidence from the wider investment market broadly supports the picture that emerged from the webinar. Estimates of first-half transaction volume range from approximately €572 million at Savills to €790 million at BNP Paribas Real Estate, with JLL placing the figure at €741 million, 18% below the first half of 2025.
The comparison requires some qualification. The first half of 2025 was boosted by three unusually large transactions involving Motel One Upper West in Berlin, the Mandarin Oriental in Munich and the Steigenberger am Kanzleramt in Berlin. Without comparable trophy sales this year, the underlying market appears considerably more stable than the headline decline suggests.
BNP Paribas recorded more than 50 completed hotel transactions during the first half, the highest figure since 2019. Average deal size nevertheless remained modest, reflecting a market driven by smaller assets, repositioning opportunities and selective portfolio trades rather than major core acquisitions.
High-net-worth individuals and family offices accounted for 37% of investment volume, according to JLL, marginally ahead of institutional investors at 35%. Value-add and opportunistic strategies represented around 60% of investment, underlining the preference for refurbishment, operator change and repositioning. Overseas investors were responsible for more than half of all transactions, underlining Germany's continued appeal to international capital.
The largest transaction was Aroundtown's sale of six Penta hotels to Ogilvy Capital for approximately €275 million. Other notable deals included BlackRock's acquisition of the Excelsior Hotel Munich and Brown Hotels' purchase of the Excelsior Hotel Berlin. A full-year investment volume of around €2 billion remains achievable, provided several larger transactions currently under negotiation complete during the second half.
The consequences of weaker market structures are also becoming visible beyond the transaction statistics. The insolvency of Revo Hospitality Group has become an important test of the relationship between hotel owners and operators.
Public reports suggest replacement operators have been identified for more than 120 hotels, creating the impression of an orderly restructuring. Advisers involved with affected portfolios, however, describe a considerably more complex picture.
Martin Schaffer, CEO of mrp hotels, noted that many leases had become "hopelessly over-rented", making renegotiation almost inevitable for incoming operators. At the same time, some replacement operators have little or no operating history in Germany, raising legitimate questions about the durability of the proposed solutions.
The collapse also exposed weaknesses in asset management. Lease agreements were insufficiently monitored, indexation clauses inconsistently enforced, FF&E reserves inadequate and inspections too infrequent. What should have been active asset management had too often become passive documentation.
Revo's significance therefore extends well beyond the failure of a single hotel group. It has forced owners, investors and lenders alike to reconsider how hotel leases are structured, supervised and managed over the lifetime of an investment.
Financing becomes another quality filter
The same emphasis on quality is evident in the financing market. German and international banks remain active, while debt funds continue to expand their presence. According to JLL's Dominik Rüger, senior financing is generally available at loan-to-value ratios of between 55% and 65%, with margins easing modestly compared with 2024 and 2025.
Peter Anthuber of CAERUS Debt Investments, speaking during the mrp hotels webinar, argued that liquidity itself was no longer the principal constraint. Rather, sponsor quality, operator quality and asset quality now all have to satisfy lenders simultaneously.
Banks nevertheless remain most comfortable financing stabilised assets in strong locations, backed by established operators and long leases. More complex situations involving repositioning, operator replacement or higher leverage increasingly fall to debt funds, which are better able to accommodate those risks.
That flexibility comes at a price. Debt fund capital is more expensive and therefore requires projects capable of generating correspondingly higher returns.
Financing for speculative standalone hotel developments has consequently become far more difficult. Without an operator and meaningful pre-letting, traditional construction finance is increasingly difficult to obtain, encouraging developers to integrate hotels into larger mixed-use schemes.
The webinar returned to this question through Norman Schaaf of CELLS Group, who argued that hotels can strengthen adjoining office, residential or retail uses while also providing part of the pre-letting needed to unlock bank finance.
His company's redevelopment of a former department store in Hamburg into approximately 22,000 square metres of mixed-use space attracted expressions of interest from 20 hotel operators and generated 17 closely comparable proposals from international brands. The response illustrates the depth of operator demand when location and product quality coincide. Berlin, by contrast, has prompted developers to take a more cautious view of the size and role of hotel components within mixed-use projects.
The evidence from operators, developers, lenders and the wider investment market points in the same direction. Investors remain interested in German hotels, operators continue to compete for attractive assets and lenders remain willing to finance well-structured transactions. None, however, is prepared to compensate as readily as before for a weak location, an unsuitable operator, an unrealistic lease or an undercapitalised sponsor.
Germany's hotel market is functioning, but no longer behaves as a single market. The strongest assets remain highly investable, while weaker properties face a prolonged period of repricing, restructuring and operational adjustment. Quality is no longer reflected simply in the price of an asset. It increasingly determines whether a transaction takes place at all.