HVS and HVI Methodology

HVS, the world’s leading hospitality consulting and valuation firm, is pleased to deliver the 2026 Hotel Valuation Index (HVI). The HVI is a hotel valuation benchmark developed by HVS. It monitors annual percentage changes in the values of typically four-star and five-star hotels in 31 major European cities. Additionally, our index allows us to rank each market relative to a European average. All data presented are in euro, unless otherwise stated.

The methodology employed in producing the HVI is based upon actual operating data from a representative sample of four-star and five-star hotels. Operating data from STR were used to supplement our sample of hotels in some of the markets. Projections for a typical 200-room hotel in each city are produced, and appropriate valuation parameters are applied to the EBITD after FF&E Reserve, using our experience of real-life hotel financing structures gained from valuing hundreds of hotels each year. We have also taken into account evidence of actual hotel transactions expectations of investors with regards to future changes in supply, market performance and return requirements.

Highlights

There is little about 2025 we could define as being ordinary: this was ‘the year of upheaval’. Against a backdrop of ongoing wars, the change in leadership in the USA resulted in an inflection point in long-established global geopolitical alliances, and tariff wars reshaped international economic alignment. We highlight some of the key themes impacting the tourism industry:

• Shifting power balances have led to a reassessment of strategic capabilities in Europe. Private-sector activity in the Eurozone surpassed expectations as manufacturers recorded their best performance since 2022. Germany, the EU’s largest economy, continued to expand its industrial base as the government ramps up expenditure on defence and infrastructure.
• Intensifying global instability did not dent the desire for travel: Europe continued to attract more than half of all globetrotters. It went on to set yet another record year, with more than 3 billion overnights (+2.3% on 2024 according to Eurostat), around half of them international. The 2019 ‘peak’ numbers are ancient history.
• Hotel performance had already ‘stabilised’ in 2024, compared to the strong RevPAR gains post-pandemic. In 2025, rates grew modestly on average across Europe which, coupled with minor occupancy gains, resulted in overall positive toplines for the year. On another positive note, the development pipeline across Europe remains modest by international standards, at under 5% on average.
• During the first half of 2025, the ECB decreased interest rates to support the Eurozone economy, down from 3% to 2%, where they remain. The Bank of England also implemented four rate cuts during the year, although the UK’s economy remains weak. A new inflationary episode, should the Middle East war constrain oil supplies, could turn rate cuts into reverse.
• Wage increase pressure is easing: the ECB wage tracker indicated a rise of less than 4% in payroll by the end of 2025 (this was closer to 5% in 2024). Lower growth of under 3% is the 2026 prediction. This remains positive in the context of stable inflation, even though cost pressures continue to be a point of concern for hoteliers. Recent developments in the Middle East could still result in a new inflation outbreak owing to oil-flow disruptions.

Outlook

Against a backdrop of modest but positive topline performances and overall marginal value gains, both challenges and opportunities lay ahead in 2026 for the hospitality industry in Europe. Caution, however, remains crucial. Some of the trends that could shape the sector in the next few months are as follows.

• We hoped that we wouldn’t have been discussing inflation at this point anymore. However, oil supply disruption caused by the conflict in the Middle East that is just a few days old at the time of writing could bring the (now controlled) inflation back into reverse. This could impact interest rates and have implications for the financing of hotel transactions and refinancing. Central banks, and hotel owners, will be watching on with interest.
• Europe’s appeal as a tourism magnet will remain very strong. Solid hotel demand and a modest project pipeline bode well for hotel performance. Depending on how long the war in the Middle East lasts, this could disrupt travel flows from that region, and a correction in the equity markets could impact the purchasing power of US travellers, so crucial to the old continent. However, domestic demand could be propped up by ongoing (and most likely increasing) investments in defence and infrastructure, which could at least partially replace the ailing automotive industry. This would be good for the EU’s economy generally, and hence good for hotels.
• There is such a thing as excessive success, however: overtourism is becoming difficult to manage in the markets affected by it, and the political drive to control it through taxation and regulation can be challenging for hotels to navigate. It will be necessary to find a compromise: that sweet spot that allows local communities to peacefully enjoy the cities they call home, whilst also benefiting from the economic uplift generated by visitors.
• The hotel industry is grappling with the fall from grace of third-party operator Revo in early 2026; this has put into focus the viability of lease agreements as an operating structure, and the alignment of owner-operator interests. Some institutional investors have opted to only team up with branded operators, rather than third-party ones, owing to the strength of covenant. It will be interesting to see what the future holds for a model that remains very popular in Germany and Spain.
• The significant easing of SONIA and EURIBOR reference rates is expected to bottom out at 3.25% and 2.00%, respectively, by the end of 2026. However, a higher-for-longer environment persists in the swap markets owing to the continued volatility caused by increasing geopolitical uncertainty. This has kept the all-in cost of debt higher than expected. Nevertheless, senior lender appetite for core hotel assets remains resilient, with low (and even sometimes very low) margins for selected assets. As positive sector trading performance continues, we are seeing a gradual normalisation of covenant structures, while debt funds remain the primary liquidity source for transitional and higher-leverage situations.
• In today’s hyper-connected digital environment, various travel trends emerged in 2025. Whether a slowcation, stargazing, noctourism or a digital detox, there are opportunities for hotels to embrace AI in the pursuit of providing these experiences to guests. Increasingly, too, off-the-beaten-path destinations are gaining momentum, as are ‘coolcations’, which provide new opportunities for markets which would have been, until recently, considered too remote or not attractive enough for leisure travellers. The search for unique experiences, and travel with purpose, create opportunities for those hoteliers ready to spot them.
• The blurring of lines between hotel and residential continues apace. While branded residential is the talk of the town, and we can’t seem to get enough of it, hotels are venturing into the living space in other, more subtle ways, such as brands entering the furnished apartment space for short-term and extended-stay accommodation (think Apartment Collection by Hilton). It poses the question: how long is too long a stay for it to belong under the hotel umbrella?

Charles RG Human, MRICS Chairman - London [email protected] +44 (20) 78 78 77 71