Italy, UK, Spain remain favored destinations for European hotel investors
Despite global disruptions in other parts of the world, the pace of hotel transactions across Europe is forecast to increase this year.
Carine Bonnejean, managing director of international hotels at Christie & Co., said a war in the Middle East and stubborn inflation in many European countries are certainly disruptors, but hotel investment continues, especially in the United Kingdom, Spain and Italy.
Especially in the U.K., hotel deals picked up in 2025 and that momentum should continue throughout 2026, Bonnejean said on the latest episode of the CoStar News Hotels’ “The Upgrade: EMEA Hospitality News” podcast.
“On our side, we did 100 [hotel] transactions last year in the U.K., which in the context of what we’ve done in the past few years is a very logical number, and a little bit up,” she said, adding there were fewer portfolio transactions.
“There was a very healthy turnover of single-asset transactions,” she added.
Spain continues its success story while Italy is proving to be a strong hotel deals market, with more destinations there in the investment spotlight, Bonnejean said.
“All the interest was very centered around Milan, Rome, and Venice. … We have seen more interest, more activity in secondary markets, when the market starts to — just as it did in the U.K. — get to a certain volume of transactions, [investors] need to have more than just a few luxury assets than just ones in the (principal) cities, so we are seeing much more in secondary cities such as Naples, Bologna, Verona,” she said.
ATLANTA — A few months into 2026, hotel and travel experts revisited expectations for the year based on continued macroeconomic headwinds, promising performance results from February and muted excitement for the World Cup as a demand driver.
For the experts who dove into the data across two sessions at the 2026 Hunter Conference, expectations for the year stayed the course — the K-shaped economy continues to affect hospitality, and inflation and interest rate cuts loom large on what the industry is watching.
Hospitality amid the 'really weird times'
Kicking off "Key statistics shaping hospitality in 2026," Jan Freitag, CoStar's national director of hospitality analytics, said STR's forecast hasn't changed since January's presentation at the Americas Lodging Investment Summit. He explained that a lot of the macroeconomic trends that usually run parallel to hotel demand — such as gross domestic product in the U.S. — aren't doing that anymore.
"We live in some really weird times," he said. "Normally, GDP growth drives demand. That wasn't true last year, and normally, because we can reprice our hotel rooms every night, we're able to outrun inflation. That wasn't true last year either."
Freitag also pointed to the value of the U.S. dollar. Usually, when that dips, international inbound travel grows, but that didn't happen in 2025.
The K-shaped economy also continues to define the U.S. hotel industry, which translates to luxury and upper-upscale hotels as the only segments seeing growth across occupancy, ADR and revenue per available room. New factors, such as the conflict in the Middle East affecting gas prices, now also need to be factored in.
"We used to say, 'Oh, the tax refunds are going to really help the American middle class in order to do another trip for summer break or long vacation,'" Freitag said. "The problem is that the increase in the oil prices are arguably going to take that out, so we're not super optimistic that this is going to change."
In his presentation, Tourism Economics President Adam Sacks dubbed it a "schizophrenic economy." He pointed to a stagnant labor market, in which hiring and quit rates are both down, and a historic decrease in immigration. These factors, among others, are what's causing income brackets to perform differently.
"If you look at how much consumers are spending on discretionary goods — and hotel stays fall within that category of discretionary goods — the middle 60% of income members, their share of consumption going to discretionary goods has fallen steadily over the last six years, but particularly over the last six months," he said. "Meanwhile, that upper group of income earners, the top 20%, have actually shown real strength and share their discretionary goods, including retailers. It's not going to get better in the near term."
Sacks, however, did have an answer to Freitag's point on GDP decoupling with hotel performance.
"If you add in hotel room nights, cruise passenger nights and vacation rentals, it's just about coming up with GDP. So there's a different mix in overnight stays, but the relationship still holds," Sacks said.
World Cup realism
The World Cup as a demand driver for U.S. hotels continues to be a topic of conversation, even if hoteliers are being more realistic about the impact. International inbound travel is still challenged, but some markets — Kansas City, Dallas and New York City in particular — should perform well.
"It's not going to be 48 Super Bowls. Trust me on that," Freitag said.
Still, the World Cup weighs heavily on STR's 2026 RevPAR forecast.
"Our forecast has [RevPAR] up 0.6% — without the World Cup, it's 0.2%. So yes, there is some lift," he said.
According to STR data, some World Cup fans are more likely to affect the local economy than others, reinforcing the idea that some host cities will see a greater impact than others.
"If you're in the market that hosts Argentina, Ecuador, Uruguay, France, Belgium — yes, you are going to see tremendous impact because those fans like to travel and like to spend," Freitag said.
Hope for 2026
U.S. hoteliers who still continue to be cautiously optimistic have plenty to hold on to, especially considering February's demand performance, Freitag said.
"February was the strongest demand February ever," he said. "We sold more rooms this February than in any other February before."
Sacks pointed to corporate travel being up, inflation expected to continue to come down, wages rising and artificial intelligence growth as a boon to the U.S. economy. Maybe most importantly is that consumers are spending more on experiences over things. This means "the hotel industry can do more than just survive in the K-shaped economy," Sacks said.
"If you take everyone earning $100,000 or more that [accounts for] 70% of all spending on hotels," he said.
Additionally, millennials are acquiring wealth at a faster pace than previous generations, meaning they are more likely to travel and book hotels.
Kalibri Labs CEO Cindy Estis Green pointed to growth in the leisure segment, as well as in extended stay and luxury, which might balance out disappointing group and business transient demand that's been affected by high corporate costs.
"What we're seeing now is much more reliance on the leisure business, and we're seeing that Thursday to Sunday growth, and those are all actually very positive," she said.
Among the myriad of problems caused by the current war in the Middle East, the hotel industries in the nearby countries are facing abrupt and complicated changes inevitably associated with airline routes and flight corridors.
During the webinar “The Middle East outlook: Assessing the impact on global travel and hospitality,” hosted by Tourism Economics and The Bench, panelists said markets and hotels dependent on international inbound demand and are directly or indirectly affected by the war in Iran will face challenges
This hypothetical timeline focuses on a two-month length of hostilities. If that timeline is realized, the effects on the hotel, air and tourism industries will likely to last nine or 10 months — essentially the rest of 2026.
Ali Shahid, CEO of The Bench, said with so much uncertainty, now is the time for “some perspective that gives us foresight.”
While events in the Middle East might be regarded as just more noise, the current conflict arrives at a time when governments and businesses thought inflation was coming under control, leading to more preferred interest rates.
David Goodger, managing director, Europe, Middle East and Africa, Tourism Economics, said it was “expected for 2026 to be a year of rebound, but that is sadly not the case.”
“Inflation will fall short of the spikes seen in 2022, but prices will rise. There will be a softening of growth, spending and gross domestic product,” he said.
He said travel to the Middle East is at risk.
Concern about traveling to the region has reversed, at least temporarily, notable performance gains since the ending of the pandemic.
Goodger said he now predicts a sharp fall in travel demand to the region, down between 25% and 30%, not the 13% growth predicted before the start of the crisis.
The recalculated numbers suggest a “$56 billion loss in tourism revenue for the region,” he said.
“Gulf Cooperation Council recovery will depend on longer-haul travel,” he said, adding in 2025, 46% of performance was domestic, 22% intra-GCC travel and 32% international inbound.
“So, one-third needs to come back to spur a recovery. … That inbound is really needed,” Goodger said.
Jonathan Worsley, chairman, The Bench, asked if the “long tail” following such crises might be becoming shorter as everyone becomes more resilient to geopolitical noise.
The Bench in mid-March postponed its Future Hospitality Summit Saudi Arabia conference to June from April. Dubai’s Gulf & Indian Ocean Hotel Investors’ Summit rescheduled from March to October, and the Arabian Travel Market, also in Dubai, moved from April to August.
Revising routes
The long tail will have a profound effect on some markets as a result of necessary changes in air routes, and the complicated, expensive nature of making such changes.
Worsley said he saw Africa especially affected by this scenario.
“Travelers are more aware of what corridors they are flying in, and that never was the case. Routes take a long time to put in place, and once you lose them, it takes a long time to recover them,” he said.
Goodger said British Airways has cut back flights to the Middle East, instead, moving its capacity to the Asia-Pacific region.
He said Middle Eastern airport hubs are a major consideration in global travel.
Deriving from changes in air routes and capacity to the Middle East, he saw at risk 3% of travel to North America, 4% to Europe, 8% to APAC and 14% in Africa.
African destinations will see a 10% decrease in roomnights, Goodger said.
Egypt, Morocco and Turkey are exposed, he said. Twelve percent of travel to the U.K. is potentially at risk and 18% to Australia, a well.
“The requirement for new routes and the higher fuel costs and longer travel times, potentially will see 21% of international roomnights in APAC at risk,” he said.
Indian and European visitors might see higher air prices due to their reliance on Middle Eastern energy.
Acquisitions of energy from Russia have not been theoretically possible since Russia’s invasion of Ukraine, a conflict that also affected air routes, which now have been further disrupted by Iran sitting close to the southern edge of massive Russia.
A webinar attendee, Daniel Silke, director, Political Futures Consultancy, said he wondered if the crisis would not spur a move to diversify airlift routes toward more direct point-to-point services as alternatives to hubs.
“But that’s easier said than done in the real world,” he said.
Staying at or close to home is another strategy, Goodger said.
Chinese outbound travel is "part of the regionalization travel story. We have seen more independent travelers (from there), but it is a market we can say still is more risk-averse,” he said.
Business sentiment due to interventionist global policy is another major concern.
Changing travel patterns
People are still prioritizing travel, and if they're not going to the Middle East, they are going somewhere else.
Goodger said leisure travel spend in the European Union sits at approximately 11% of income, a level that has not changed in the last four years.
He said travel is increasingly important, but people are focusing on value and seeking savings on hotels and other lodging accommodation.
Goodger, Shahid and Worsley said Europe stands to gain more travelers as people cancel travel plans to GCC countries. Places like Italy and Spain with high perceptions of safety should benefit, and the speakers said North Africa — notably Egypt and Morocco, perhaps Tunisia — will also see more demand.
“Egypt does have exposure to GCC travel, but it also has opportunities from Europe,” Goodger said.
Istanbul and Addis Ababa are two airport hubs that might see increased numbers.
Another thing webinar panelists agreed on was that a major lesson learned in other crises would prevail.
“We did not see hotel average daily rate being cut during COVID-19, and that lesson likely will be seen in this setback, too,” Goodger said.
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