HVS released their annual European Hotel Valuation Index (HVI) this week, showing hotel values across Europe had increased around three percent year over year in 2022 with Paris, London, Zurich Amsterdam and Rome having the most expensive properties.

2022 hotel values experienced significant appreciation due to various factors, including significant RevPAR increases and recovered ancillary revenues. Unfortunately, inflation, increasing cost of debt repayment, and recession hampered any meaningful recovery, leaving hotel values below their 2019 peak levels.
“2020 saw hotel values decline by 15%, only to rebound by around 5% the following year. 2022 proved an uneven year across Europe in terms of performance for hotels; some aspects fared much better while other aspects lagged behind,” noted Julia Dzerkach of HVS London as report co-author and analyst.
HVI reported at the end of 2018 that hotel markets had made significant post-pandemic recovery, with several gateway cities reaching higher RevPAR levels by December 2022 than 2019 due to an upsurge in leisure demand and corporate travel returning to about 75% of pre-pandemic volumes. Contracts tend to move from fixed, volume-driven rates toward dynamic ones which offer positive tradeoffs for segments where remote working and Zoom meetings were likely to have lasting ramifications.

However, significant challenges arose for Europe’s hotels due to labor shortages that forced many to make drastic cuts to opening hours, F&B facilities and room inventories; high inflation negatively impacted wages and the cost of goods, with rising energy bills the likely result. Meanwhile rising interest rates combined with concerns regarding cost-of-living crises impacting hotel demand as well as potential threats of recession resulted in investors turning away from hotels; further compounded by fears about an impending banking crisis at this report’s publication date.
Athens, Dublin and Lisbon experienced stronger recovery of hotel values during 2022 than other markets with large percentage changes of 5.8%, 5.2% and 5.9% in hotel values (in Euro).
Improved leisure demand and an increase in travelers from core markets such as the US have led to value recovery in more established cities such as Amsterdam (up 3.8%), Milan (up 2.4%) and Rome (1.3%), although at a more subdued pace.
“Regions experiencing only marginal recovery may include those with unfavorable exchange rates such as Scandinavian markets or slow returns of corporate demand in Frankfurt or because key source countries’ demand was limited due to Ukraine war,” noted co-author Dannie Murphy of HVS London analyst Dannie Murphy as co-author of report.
Looking forward, the HVI paints a more optimistic outlook although war in Ukraine, cost-of-living crisis effects on demand as well as ADR sustainability and possible margin erosion could continue to pose obstacles for value recovery.

“HVS London is starting off 2023 on an impressive note from both a revenue and occupancy standpoint, with ADRs at record levels across many markets and strong prospects of occupancy recovery in the months to come,” noted Sophie Perret, Senior Director at HVS London and co-author of this report.
“Investors are looking forward to increased visibility in the short term so they can move past their current “wait and see” mentality of 2022. Substantial amounts of capital await investment into hotels if return levels can be achieved.”