Over the past couple of years, Europe’s largest economy has slumped from one crisis to another with lasting implications for the hospitality real estate market. In this three-part series we are putting the spotlight from Germany with articles covering the state of the transaction market, the future of leasing and more. You can read part one here and part two here.
Germany may be one of Europe’s most established economies, but it has become one of its least predictable territories for hospitality investment, according to market watchers. In the midst of economic and political transition, innovative sector players see an opportunity for exploring new destinations and asset types, fuelled by technology and secular trends.
One key theme has become increasing interest in leisure-focused and resort properties, in the light of the business segment’s sluggish recovery after the pandemic. German institution Union Investment used the post-Covid period to acquire its first resorts on Lake Tegernsee and the island of Usedom in the Baltic Sea. Says Andreas Löcher, head of investment management hospitality at Union Investment: “The resort hotel sector has experienced decades of growth. It has shown itself to be crisis-proof and showed its resilience again during the Covid-19 pandemic.”
Climate change
Andreas Ewald, founder and managing partner of Engel & Völkers Hotel Consulting, advises investors to consider the role of climate in shaping tourism patterns. “It is true that climate change is driving holidaymakers further north in Europe,” he observes, with regions like Germany and the Nordics benefiting from growing concerns about heatwaves and extreme weather events in southern Europe.
This shift is also fueling interest in wellness and health-focused travel, bolstering spa destinations such as Baden-Baden. Germany’s reputation for high-quality healthcare and wellness offerings positions it well to attract tourists seeking relaxation and rejuvenation.
However, Ewald highlights the importance of seasonality and weather in influencing Germany's tourism potential. “In the wake of Covid, we saw extremely good occupational figures and room rates for the north German coast, particularly from domestic travellers,” he notes. “But now, Germans are comfortable going further afield once again, including long-haul travel, and predictably warmer weather is a factor in that.”
Ewald suggests that while weather may limit some aspects of Germany’s appeal, its focus on wellness tourism and its ability to cater to shifting climate-conscious travellers provide opportunities for sustainable growth in the hospitality sector.
The role of technology
One positive hallmark of the German hospitality scene has been the presence of tech-backed operators introducing innovation into the sector. Berlin-headquartered Numa has been expanding across Europe with its proprietary technology stack that allows guests to use their phones to check in, open their rooms, and access customer services.
Limehome, a tech-backed serviced apartment provider based in Munich, is also leveraging its technology to expand and reshape urban landscapes with a focus on converting offices into hospitality assets. Over the last 12 months, the company reports that it has signed new projects to convert around 35,000 sq m of commercial space into modern apartments. Limehome notes that conversions are becoming increasingly important due to falling demand and rising vacancy in the office and retail sectors amid uncertainty about future demand. The firm’s data demonstrates that serviced apartments, with comparable capital expenditure requirements and competitive, reliable rents, present a strong alternative to upgrading vacant offices or converting them to residential use, as well as winning ESG points for converting rather than demolishing and reconstructing premises.
Josef Vollmayr, co-CEO and co-founder of Limehome, says: "Converting existing buildings is becoming the project development of the moment. The property sector needs an alternative to energy-intensive project development. By 2027, we expect to add a further 3,000 apartments to our project pipeline through conversions.” Vollmayr notes that tourism’s carbon footprint is not merely connected to flights, cruise ships and car travel. “Accommodation accounts for around a fifth of industry emissions,” Vollmayr says. “Our digital operating system, which does not require on-site staff, significantly reduces the carbon emissions of our apartments compared to conventional hotel rooms.”
The firm is currently embarking on the conversion of an office in Bremen into serviced apartments, marking its third scheme in the city. The scheme on Martinistraße will create one of Limehome’s largest hospitality structures to date with 167 apartments over eight floors, situated next to the historic Weser river promenade and Bremen's city centre. Architectural firm dt+p will handle the conversion of the existing building, which is scheduled for completion at the end of 2026.
German owner-managed property developer and investor Centralis is also working with Limehome on serviced apartments. The firm recently acquired a site in Hamburg for a serviced apartment development, for which planning consent has already been granted. The 700 sq m site at Lüneburger Strasse 5 in Hamburg will host a total of 88 serviced apartments, to be operated by Limehome on completion in Q3 2026. Centralis is also nearing completion on another scheme in Munich to be run by Limehome, a 42-apartment scheme in trendy Friedrichshain fashioned out of an old hotel.
Says Felix Lorenz, head of investment at Centralis: “The repositioning of the hotel in Berlin and the start of construction in Hamburg demonstrate that we are successfully operating counter-cyclically in a challenging market environment, responding to increased demand from occupiers and operators in this rapidly growing asset class.”
The luxury segment
Andreas Ewald sees technology as an increasingly important driver of growth and efficiency in Germany’s hospitality sector. “Technology can play a big role in room provision, as certain firms have shown with the way they digitise the customer journey,” he explains. Innovations in areas like online booking, personalised guest experiences, and seamless check-in processes are already enhancing operational efficiency and customer satisfaction. However, Ewald notes that technology’s impact varies across different segments. “It has some limitations in F&B provision and in the luxury segment,” he adds, highlighting the continued importance of personal interaction and high-touch service in these areas.
Luxury is one of the hospitality areas under considerable pressure in Germany, he notes, due both to expenses and a ceiling on room rates. “While you can charge four figure sums for a night in Paris, London or Rome, Germany’s best hotels are attracting around half that, while facing similar or higher costs,” he notes. “The industry needs to find efficiencies and technology might be the way.”
German investor Aroundtown is already looking at how technology can help balance its wage bill, by investing in avatar technology to partly run its hotels. Frank Roseen, ESG leader at Aroundtown, explains: “We focus on innovation in real estate, and we want to think about how spaces are used in the future. We are already testing hologram staff in some of our hotels.”
The firm is currently experimenting with AI avatars which are fully live, remote staff members, part live and part programmed avatars, or fully automated holograms for tasks including check-in, reservations, queries and more. Kamaldeep Manaktala, CEO of Aroundtown’s hotel division, highlights that these technologies “can both revolutionise guest service in our hotels and automate buildings and workflows to improve operational efficiencies”.