100 European execs site profitability challenges
EUROPEAN REPORT – Luxury markets face oversupply, significant cost pressures exist from regulatory changes, regional performance reveals disparities, but look for continued investment and expansion in certain European segments and geographies. So says Deloitte’s 2025 European Hotel Industry and Investment Survey.
In an online survey with 100 owners, operators, lenders, developers and investors that took place between August 6 and September 26, 2025, key findings revealed a positive outlook with profitability remaining a challenge. Deloitte said executives have a positive view of the long-term outlook for the European hotel markets, but maintaining or increasing profitability has become the top priority this year. Labor and workforce challenges remain the industry’s number one risk in the year ahead.
Other highlights:
M&A activity cools: The data also points to a possible slowdown in the pace of M&A activity. ‘Growth through acquisitions’ has dropped in the priority ranking this year.
New source of equity focus: when considering source of equity capital for U.K. hotel acquisitions, compared with last year fewer respondents selected ‘private equity’ but ‘family offices’ is expected to see a significant increase in 2026.
Diversification or profit versus capital: When it comes to diversifying, while profit margin pressures and the need to improve ROI are the main drivers, the need for large capital investment is the main barrier.
London and Edinburgh lead investment: In terms of expectations for market performance, in the U.K., established tourist and business hubs continue to attract investment with Edinburgh still the most attractive city for the fifth consecutive year. London remains the most attractive European city for hotel investment in 2026.
Digital transformation and AI surge: There is a fast-growing focus on investing in smart technology and automation both for cost optimization and to better serve guests.
Hotel news around the world: The biggest global trends from international conferences and brand development
Japan's hotel industry has been the beneficiary of positive dynamics for awhile, with current exchange rates making it an inexpensive option for international travelers.
The country's long-term availability of inexpensive debt is another reason Japan has continued to thrive, said Steve Carroll, head of hotels and hospitality in Asia Pacific for CBRE. Carroll joined the latest episode of the CoStar News Hotels Podcast to discuss how Japanese investors are poised for success.
"Our No. 1 market is Japan," he said. "Both onshore investors and offshore investors are continuing to pour into Japan."
Carroll said Japanese real estate investment trusts in particular are poised for success at the moment.
"Given the much lower cost base, Japanese REITs in particular are leading the charge," he said. "They will dominate this year and into the future. What's happening [is they are] dominating tier 1 markets — Tokyo, Osaka, Kyoto and some of the main resort destinations in Japan as well."
He noted investors coming from outside the country are more focused on "a value-add or opportunistic" type of plan for their capital.
"To do that you need markets to be positive, i.e. you get market growth, but on top of that you need asset-level initiatives and asset management," he said, explaining that the underpenetration of hotel brands in both Japan and South Korea opens opportunities for international investment groups.
STR's Jesper Palmqvist said investment in Japan isn't without risk even though it remains the most attractive country in the region, with concerns about bond yields, continued weak currency and political conflicts with China.
"However strong Japan is — it's safe, it's large, very liquid — is there a risk of capital flight in the medium term from Japan?" he asked.
He also said that second-tier markets in Japan are seeing a different growth story than the main international destinations, particularly because those have grown more expensive for domestic travelers.
"It is a very different picture in how it's growing, where most of it is domestic travel [in secondary markets], for sure," Palmqvist said.
Listen to the podcast above for the full interview with CBRE's Steve Carroll and STR’s Jesper Palmqvist, including discussions of the outlook across the Asia Pacific region.
Prestige Class Amenities
An amenity bag full of travel-sized essentials is what any savvy traveler needs on a flight. Korean Air partnered with luxury brand Graff to provide hand cream, lip balm, and a unisex fragrance. The bag also contained an eye mask and dental kit.
Meanwhile, the crew continued to monitor passenger comfort levels, offering to help prep their bedding, pouring and passing drinks, acknowledging children and parents, providing information and directions, and securing items. They moved about like they had practiced as a team, everyone aware of potential needs or wants. When ordering meals, a flight attendant helped me pair my wine and advised me on her favorite choices. She asked whether I would like to be woken up if I was sleeping when either of the meals was delivered, to which I, of course, said yes.
When I got up to use the bathroom, I noticed on multiple occasions that the flight crew were working to keep the space sanitary—I witnessed them wiping down the bathroom in between guests every time I went to the bathroom. In the galley, doors were wiped and shut, garbage was whisked away, and the crew working in the space was incredibly mindful of passengers waiting in line for the restroom, acknowledging and making space for the awkward gathering.
The Gourmet Menu
The menus have surprising range, and there are multiple delicious items. On my Atlanta to Seoul flight, I was offered two meals (called “First Meal” and “Second Meal”), both of which would be considered dinner in terms of breadth. The first meal started with an amuse bouche of tuna tartare, a mushroom soup, and couscous and shaved Parmesan salad. After that came beef bourguignon with potatoes and roasted veg, a three-cheese plate, and a dessert of fruit or Häagen-Dazs ice cream. I was impressed with the cutlery–sturdy stainless steel with the Korean Air emblem emblazoned on the handle. And of course, copious amounts of wine. For my second meal, I went for the Korean favorite Bibimbap, served with beef and its many sides, including sticky rice, broth, and crisp vegetables. A variety of bread and soup were available for Western meals. I liked the Korean food much better than the Western food–the beef in the Bibimbap was more savory than the bourguignon.
The beverage list was particularly impressive. Besides the variety of teas, coffee, and hot chocolate, as well as a bunch of juices, the wine list is curated by an expert in-house sommelier, Sang Jun Lee, in collaboration with renowned wine consultant Marc Almert (ASI World’s Best Sommelier 2019). I tried the La Perrière Megalithe Sancerre, a dry, crisp white wine from the Loire Valley, and sampled the Duval-Leroy Champagne as my welcome beverage.
The flight attendant asked if I wanted to be woken up if I was sleeping at either meal time, to which I of course replied yes. But as the mother of a 6-year-old who has school at 7:30 a.m., I understand how frightening it can be to have to wake someone from a deep slumber. I found their soothing verbal nudge (“Excuse me, Ms. Levitt? Are you ready for your meal?”) to be extremely thoughtful, especially when I’ve experienced harsher wake-up calls (brightening lights, loud greetings, and even a meal plopped in my lap).
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