Midscale Hotels and Experience-Focused Resorts Drive Profit Gains Across Europe

Some parts of the European hotel market are doing much better than others — and the winners might not be who you’d expect.
 
Figure 1: Midscale and Economy hotels lead on profitability.

Recent HotStats data shows that midscale and economy hotels are leading the pack in profitability, with gross operating profit (GOP) margins of 42% and 41%, respectively. Their simpler business models and lower cost structures have helped them stay ahead, especially now that everyday expenses like wages and supplies are climbing. While rising costs remain a challenge, their lean models help absorb the impact—unlike the luxury end, where pushing ADR is often the only way to offset inflation.  

Unlike high-end hotels, which often try to raise rates to cover increasing costs, midscale hotels haven’t had the same flexibility. Still, they’ve managed to stay profitable. That’s a sign that guests are not just looking for fancy extras — they’re choosing places that offer good value.
 
Figure 2: Extended Stay leads Europe’s profitability race at 52%, while Wellness Resorts trail at 26%. The gap in margins across segments underscores that not all hotel types are created equal.

Wellness and Golf Resorts Pull Ahead

Another standout from the data: resorts focused on wellness and golf are seeing the biggest improvements in profit margins. These properties seem to be tapping into a shift in guest priorities — people are looking for travel that offers more than just a nice room.

Rather than building new features or adding more luxury touches, these resorts are leaning into experiences like spa treatments, healthy dining, and outdoor activities. And it’s working. Guests are willing to spend more on experiences that feel personal or restorative, and operators are seeing better returns because of it.

Southern Europe’s Steady Climb

When it comes to regional performance, Southern Europe continues to stand out. Since January 2020, total revenue per available room (TRevPAR) has gone up by 27%, while gross operating profit per available room (GOPPAR) has increased by 38% 
 
Figure 3: GOP margins steady overall, but regional contrasts tell the full story. In APAC, India’s strong 47% margin is offset by China’s slowdown at 30%. Europe benefitted from a strong summer and smart cost controls. The Middle East maintained top profitability at 44%, though rising costs could limit future gains. In the U.S., despite revenue growth, margin improvements were held back by labour and utility pressures.   That’s a strong improvement — and not just a short-term bump. In many Southern European countries, hotel profits have now settled at levels well above what they were before COVID. And it’s not just because of strong summer travel. A lot of operators in the region made smart changes during the pandemic, and those decisions are now paying off.

Across Europe, a Slower But Healthier Pace

Looking at Europe as a whole, growth in 2025 has started to slow compared to last year. But that’s not necessarily bad news. Some hotel markets have now found a new normal — one that’s more stable and, in many cases, more profitable than the old one.
Rather than chasing pre-2019 benchmarks, hotels are focusing on what works today: keeping costs under control, making better use of space and staff, and finding new ways to bring in revenue. It’s less about big jumps and more about steady progress.
What This Means for Investors

There’s a clear message here for investors. Hotels that offer strong value — especially in the midscale and economy segments — are delivering solid returns. They appeal to a wide range of travelers and can better absorb cost increases 

At the same time, resorts that offer unique, experience-led stays — whether it’s wellness, golf, or nature-focused getaways — are proving their worth. They bring in extra income from things beyond just room bookings and tend to attract guests who are willing to spend a little more for something meaningful 

Bottom Line

The hotel market in Europe is changing. Profit isn’t just about high rates or five-star amenities anymore. The hotels doing well right now are the ones that have kept things simple, focused on what guests really want, and found smart ways to manage their costs.
As travel patterns shift and guest expectations evolve, this new landscape is giving hotel owners and investors a lot to think about — and some clear signals about where the opportunities really are.

Juan Gallardo Director of Hotel Intelligence – EMEA.  Connect with Juan on LinkedIn.

HotStats, a Duetto company, is a global data benchmarking firm, providing performance analysis and a tool to assess financial and operational hotel data globally. Offering insights to owners, operators, and investors, it aids in evaluating property financial performance and competition, crucial for informed decisions and investment evaluations.

 For more information, visit www.hotstats.com.