Hotel Real Estate Market in Transition
Ahead of the International Hospitality Investment Forum 2026 (IHIF EMEA), mrp hotels and elevatr surveyed leading experts from the German-speaking hotel operating and hotel real estate market. Their feedback paints a clear picture: hotel real estate remains attractive, but market logic has adjusted to a higher-cost, higher-interest-rate environment shaped by cautious consumers and geopolitical uncertainty. More than ever, success now depends on resilience, operator quality, brand strength, profitability and the ability to respond flexibly in a volatile environment.
Expert Panel
Matthias Beinlich (b’mine hotels) · Stephan Gerhard (Solutions Holding) · Frank Hildwein (Deka Immobilien) · Felix Lorenz (Centralis Immobilien) · Martina Maly-Gärtner (UBM Development) · Daniel Peters (Motel One) · Boris Simm (Primestar Group) · Philipp von Bodman (ACHAT Hotels)
Key Takeaways at a Glance
• Operator Market: Consolidation continues. Margin protection and operational efficiency are becoming critical, while scale alone is no longer a differentiator. Digitalisation and automation are evolving into measurable competitive advantages.
• Investment Market: Compared to 2022, the still-elevated interest-rate environment remains the key driver of valuation and transaction activity. Opportunities are concentrated in the budget/economy and serviced apartment segments, as well as in repositioning and value-add strategies.
• Market Trends: Geopolitical uncertainty, volatile cost structures and unpredictable or rapidly changing demand patterns are increasing the need for strategic agility and ongoing operational adaptation.
• Bottom Line: The most attractive hotel assets and operators are those that combine operational resilience, clear market positioning, and realistic, sustainable capital structures.
I. The Operator Market
Consolidation as a Market Reality
The European operator market is moving through the long-expected consolidation phase. Insolvencies, takeovers, restructurings and new strategic partnerships are not cyclical outliers, but rather the result of structural imbalances built up over recent years. Conventional lease models in particular are under increasing pressure, having been underwritten in a very different interest-rate and revenue environment and now proving economically unsustainable in many cases. At the same time, labour, energy, procurement and financing costs have settled at levels that expose operational weaknesses without mercy and put EBITDA under pressure.
The implication for operators is clear: scale alone is no longer a viable success model. Competitive advantage increasingly belongs to businesses that actively manage their cost base, position their product clearly and keep operational complexity under control. For owners and landlords, this means lease and rent structures must be assessed against realistically achievable market parameters, rather than against the record rents of previous market cycles.
Margin Quality Becomes the Central Performance Metric
The scope for rate-driven growth is narrowing. In many markets, rising costs can no longer be passed through consistently via higher average rates, particularly where guests have become more price-sensitive or where volume-driven competitors are gaining market share. Midscale and traditional full-service concepts are being affected disproportionately by this pressure.
Protecting operating margins has therefore become essential. Standardisation, digitalisation, automation, leaner organisational models, clearly defined service propositions, higher direct distribution shares and the disciplined elimination of unprofitable service components are all operational levers with direct impact at EBITDA level. Operators that structure their operating model effectively not only improve on-property performance, but also enhance their attractiveness to owners, brand partners and capital providers.
Technology and Automation Are Becoming Investment-Relevant
Digitalisation is no longer viewed as an add-on, but as an integral part of a future-proof business model. AI-supported systems and automated processes are gaining importance in revenue management, sales, the guest journey and back-of-house functions. Their value lies not only in efficiency gains, but equally in improved scalability, faster responsiveness and reduced dependence on labour – and, as a result, lower costs.
From an operator perspective, technology has become a key lever for protecting profitability and service quality. From an investor perspective, it is increasingly a test of an operator’s long-term viability: those who embed digital capabilities systematically strengthen the resilience of their business model and create a more robust platform for growth, repositioning and exit readiness.
What Owners Should Expect from Operators Today
Operator selection is now more than ever a central element of risk management. In addition to brand and concept, the key assessment criteria include credit quality, lease coverage (LCR), distribution strength, above-property support and the resulting operational stability in weaker trading periods. Transparency has therefore become a core requirement for owners and investors – both through clear monitoring mechanisms and through well-defined alignment and communication processes in cases of sustained underperformance.
A strong operator is no longer merely a brand or product promise, but a financially and operationally verifiable platform. This is where the operator market and the investment market become directly intertwined.
II. The Investment Market
Interest Rates and Financing Continue to Shape the Landscape
The persistently high interest-rate environment remains the defining factor for valuations and transaction dynamics, regardless of any potential base-rate adjustments. Higher capital costs – particularly at the long end of the curve – are making new developments and larger capex programmes more difficult, extending price discovery processes and increasing the requirements placed on capital structures.
At the same time, legacy assumptions from the low-interest-rate era – around land pricing, construction costs, return expectations, equity requirements and lease structures – continue to weigh on development projects, refinancing situations and reletting activity.
“At best, I expect stable pricing. At the same time, developments remain difficult to make viable.”
Return Expectations: More Differentiated, Not Automatic
Depending on product type, location, operator quality and contractual structure, hotel investments currently generally require target returns in the 5% to 7% range. Yield is not an isolated metric, but the result of an overall investment equation in which operator creditworthiness, contract structure, market dynamics, repositioning potential and exit attractiveness interact directly.
For investors, this means a return to more differentiated underwriting approaches. A high-quality hotel is not automatically an attractive investment; what matters is the credibility of the relationship between cash flow stability, operator quality and capital deployment.
Segment Selection Matters More Than Broad Asset-Class Logic
Luxury, as well as budget, service-focused and long-stay products, remain attractive investment segments. Luxury performs particularly well where barriers to entry, an international demand base and limited premium supply coincide – especially where investors can negotiate management agreement structures. Budget and long-stay concepts often offer more attractive risk-adjusted returns due to lower operational complexity and more resilient operating models.
The midscale and upscale segments are facing the greatest conceptual adjustment pressure. In many markets, midscale and upscale hotels are being forced to redefine labour-intensive operating concepts in order to meet changing guest expectations, rising efficiency requirements and today’s cost realities. This creates opportunities for long-term income protection, but also requires greater selectivity from investors.
“Modern solutions are especially needed in the midscale segment – solutions that address both changing customer expectations and the industry’s structural cost drivers.”
Flexible Capital Sources Are Gaining Importance
The current market environment favours investors with fast decision-making capabilities and flexible access to equity. Family offices, asset managers, investment managers and opportunistic capital currently enjoy advantages over more highly regulated institutional fund structures.
Institutional investors remain relevant, but they are acting far more selectively, with a sharper focus on the operator platform, covenant quality, lease coverage and exit mechanisms. Operator selection has therefore become an even more integral part of the investment decision.
III. Trends and Outlook
Resilience Is Becoming the Dominant Theme
Across all market segments, resilience and adaptability are replacing the growth optimism that previously defined decision-making. Investments are being underwritten more conservatively, with greater use of scenario analysis and a more partnership-driven approach to structuring. Prestige projects without a robust economic rationale are losing appeal, while resilient concepts backed by solid demand fundamentals and disciplined execution are gaining relevance.
What matters is not the most ambitious scenario, but the most resilient one – measured by cash flow quality, execution discipline and the ability to perform in weaker market conditions.
Positioning as a Continuous Process of Adjustment
Hotel products must now be reviewed and adapted more rigorously. Shifts in demand, competitive dynamics, service expectations, labour costs and regulatory requirements are changing faster than in previous market cycles. Static positioning over a multi-year period is no longer a viable steering model.
“We need far more agility, especially when it comes to the positioning of our hotel products. We need to reassess them every year and have the courage to make changes – rather than waiting for things to go back to the way they once were.”
Geopolitics and Regulation Have a More Immediate Market Impact
Geopolitical instability, volatile energy prices and diverging regulatory frameworks now have a more direct impact on consumer behaviour, investment appetite and financing costs than they did just a few years ago. As a result, scenario planning is gaining strategic as well as operational relevance.
For investors, transparency, stability and the political reliability of a market are once again becoming hard location factors.
IV. Conclusion
Hotel real estate remains an attractive asset class, and the sector continues to attract many investors with limited prior exposure to hospitality. At the same time, the investment framework has shifted fundamentally over recent years: assumptions that held in the low-interest-rate era are no longer reliable. Today’s market calls for operationally robust products, realistic capital structures and partners capable of combining operating excellence with strategic adaptability.
For operators, the core challenge is to align business models rigorously around margin quality, scalability and technological integration. For investors, the focus is on even greater selectivity: investment success is determined not only by category, but by the strength and credibility of the specific structure – including location, operator, contractual framework, market positioning and repositioning potential.
The current phase is not simply a cyclical downturn, but a process of structural maturation. It is putting pressure on inefficient and overstretched models, while at the same time creating opportunities for those who prioritise quality over volume, structure over market euphoria and resilience over short-term yield optimisation.
