New CBRE Index Highlights Europe’s Top Hotel Investment Destinations

CBRE has introduced its inaugural European Hotels Destination Index, which evaluates 66 European destinations based on key market pillars and economic fundamentals. This tool provides a structured framework for investors to assess market potential and align their strategies with growth opportunities.

The European hotel sector is experiencing sustained growth, driven by increased travel demand, despite supply growth remaining below historical averages. This dynamic is attracting global real estate investors who are increasingly relying on data-driven strategies to identify lucrative investment opportunities. In response, CBRE has introduced its inaugural European Hotels Destination Index, which evaluates 66 European destinations based on key market pillars and economic fundamentals. This tool provides a structured framework for investors to assess market potential and align their strategies with growth opportunities.

Understanding the Index

The European Hotels Destination Index is a proprietary scoring model that benchmarks European destinations based on two equally weighted dimensions: key market pillars and economic fundamentals. These dimensions are critical in assessing the resilience, liquidity, and investment potential of hotel assets across Europe. The Index evaluates factors such as international tourism flows, hotel demand, investment penetration, labor costs, and macroeconomic indicators, including workforce depth and local economic health. This comprehensive approach allows investors to compare markets, prioritize opportunities, and align their location strategies with future growth potential.

Key Market Pillars and Attributes

The Index examines measurable market characteristics that shape the viability and appeal of hotel investments across European destinations. It evaluates each destination across seven core sub-factors to produce a Structural Index Score. This score provides insights into travel flows, scale, liquidity, and operational issues. While macroeconomic factors may not directly correlate with hotel investment liquidity, they are crucial in shaping a city’s hotel demand profile and operational resilience. These indicators provide context around local economic health, spending power, labor market dynamics, and travel affordability.

Leading Destinations

The top 20 markets ranked by economic factors reveal a mix of scale, wealth, and workforce dynamics. London leads the Index, supported by its large population and favorable tourism-weighted exchange rates. Athens, Naples, and Tenerife stand out for their high Hospitality Workforce Elasticity (HWE), reflecting their ability to absorb labor into the sector. High-income markets like Dublin, Oslo, Copenhagen, and Amsterdam perform well on GDP per capita, offsetting smaller populations with spending power. Conversely, Spanish leisure destinations such as Malaga, Gran Canaria, and Mallorca achieve high scores through strong tourism-weighted exchange-rate positioning and higher HWE.

Defining Attributes of Destination Appeal

Beyond quantitative analysis, qualitative attributes also play a significant role in shaping a destination’s appeal. These defining attributes include strategic tourism assets, connectivity, natural and cultural resources, infrastructure, and policy prioritization of tourism. Western European markets, particularly Spain, France, and Italy, stand out for their exceptional cultural and natural assets. Air connectivity is another critical factor, with major airports such as London Heathrow, Paris Charles de Gaulle, and Amsterdam Schiphol serving as demand generators and amplifying strategic advantages for international hotel investment.

Overall Scores and Conclusion

The aggregated scores for European hotel markets highlight the relationship between a destination’s market depth and its investment appeal. Structural factors such as market size, liquidity, and tourism volume demonstrate the strongest correlation in the Index, indicating their dominant influence on market positioning. Economic factors, while considered, show moderate correlation, suggesting that long-term performance is more closely tied to robust demand fundamentals and market infrastructure. The Index does not prescribe specific investment locations but provides a framework to help investors understand market differences and align their strategies accordingly.

View the CBRE European Hotels Destination Index.