Europe’s hotel market faces new challenges in 2025

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Post-pandemic growth gives way to tariffs, economic fears, and market volatility

Apr 10, 2025

In 2024, Europe’s upscale and luxury hotel market saw a significant post-pandemic recovery, with impressive investment activity and resilience. However, the sector is now grappling with new challenges, including economic uncertainty, tariffs, and stock market volatility, which threaten to slow down growth. Key concerns include a potential economic slowdown, increased development costs due to tariffs, and fluctuations in asset valuations, which could impact future investments and transactions in the market.

Key takeaways

1. Strong 2024 performance: The European upscale and luxury hotel market saw a transaction volume of €10.95 billion ($12 billion) across 137 deals, with an average deal size of €79.9 million ($87.5 million).
2. Economic pressures: Although inflation slowed and interest rates decreased, fears of a recession, reduced travel demand, and tariffs now pose significant risks to the sector.
3. Impact of tariffs: New tariffs may inflate development costs and affect markets that rely heavily on American tourists, particularly in upscale and luxury segments.
4. Valuation and market uncertainty: Stock market volatility and uncertain economic conditions may lead to lower asset valuations, which could delay or pause current transactions.
5. Investor hesitancy: Concerns about tariffs, economic slowdown, and reduced international travel are making investors more cautious about committing to new projects or transactions in the European hotel market.

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