Europe -  Florence

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The capital city of the Italian region of Tuscany is also its most populous, with approximately 382,000 inhabitants, expanding to more than 1.5 million over the greater metropolitan area. Florence was declared a World Heritage Site by UNESCO in 1982. The city is noted for its culture, Renaissance art and architecture, monuments and numerous museums and art galleries, including the Uffizi Gallery and the Palazzo Pitti. Florence benefits from a strong fashion sector, with the likes of Roberto Cavalli, Salvatore Ferragamo and Emilio Pucci all based in the greater city area. Florence hosts the biannual Pitti Imagine fair at the Fortezza da Basso in January and June every year.

Whilst 2018 and 2019 were somewhat stagnant years in terms of international visitation to Florence, domestic tourism supported the total arrivals to the city. Overall, total visitors grew at a compound annual rate of 1.4% between 2010 and 2019. The city is generally heavily reliant on international feeder markets which account for around 70% of demand. After several years of RevPAR growth, performance dropped substantially on account of the COVID-19 crisis, with RevPAR reaching 15% of the 2019 level in 2020 and 40% in 2021. In 2022, the Florence hotel market saw a major uplift in both occupancy and average rates, which resulted in RevPAR returning to pre-pandemic levels in real terms. The return in force of US demand, so important to Florence, and the city’s strong leisure base helped to drive rates by over 30% of the 2019 levels in nominal terms.

The city’s hotel market is characterised by small properties and a proportional lack of international operators, as many hotels are independent or part of a regional brand or group. Barriers to entry are extremely high owing to most of the city centre’s buildings being listed, making conversions very costly. The current Florence hotel pipeline consists of seven projects, which are expected to bring 1,240 rooms to the city’s hotel market. These hotels, which are all in the construction phase, include two independent hotels opening in April and October 2023, as well as five branded hotels: the 118-room Ruby Hotel Florenz, opening in 2023; the 82-room Collegio alla Querce Auberge Resorts Collection (opening in June 2024); the 550-room Social Hub Belfiore (June 2024); the Social Hub Florence Manifattura Tabacchi (January 2024) and the 119-room W Florence (May 2024).

Hotel transactions in Florence rebounded strongly in 2021, mostly driven by international private investors. The 212-room Hilton Metropole and 121-room Hilton Garden Inn Novoli were acquired by British investment firm Pygmalion Capital in April 2021 for an undisclosed amount. Real estate investor Hines acquired the regeneration project of the Manifattura Tabacchi in December 2021 for €80 million and intends to develop new student housing with more than 500 beds. Other transactions include the sale of the 115-room NH Anglo American in April 2021 to Castello SGR and the 173-room 25hours in November 2021 to Invesco. No hotel transactions took place in Florence in 2022.

Overall, our HVI analysis indicates a value increase of 4.9% per key in Florence in 2022 compared to 2021 – values per room remain 8% below the 2019 values for this market. The pace of recovery for this market will continue to be supported by its strong leisure base and high barriers to entry. Whilst the pool of investable assets in this market is small, we expect the ongoing momentum in the Italian hotel markets to continue to drive investment into Florence in the form of capital expenditure and asset acquisitions in the short to medium term as opportunities arise.

Change In Value For Market: (€Euro)

Significant Value Increase: Greater than +10%
Moderate Value Increase: Between +3% and +10%
Stable Values: Between -3% and +3%
Moderate Value Decline: Between -3% and -10%
Significant Value Decline: More than -10%

For more information, please contact:

Sophie Perret, MRICS, MBA
Managing Director
[email protected]
  • +44 0 2078787722 (w)
  • +44 0 7725781037 (m)