After years of stagnation and subdued investor appetite, Germany’s hotel sector could finally be on the cusp of a rebound. Bolstered by government efforts to revive the economy and a slowly improving outlook for growth, the market is beginning to catch the attention of opportunistic investors. But while glimmers of recovery are appearing, the landscape remains complex.
Market on the brink of change
While Germany’s hotel market has long been viewed as a cornerstone of continental Europe’s hospitality sector, its post-pandemic recovery has lagged behind its neighbours, with lethargic trading performance and a lack of transactional activity.
"Germany's trading performance has been slow to recover to pre-pandemic levels," notes Will Duffey, head of EMEA Hotels & Hospitality Capital Markets at JLL.
Positively, though, he adds: “Last year we observed a modest uptick in completed transactions in the market. We expect this positive trend to continue into the current year with what stock is in the market, sentiment and how trading performance is playing out.”
That sense of cautious optimism is echoed by other players who believe the time is now for strategic moves. Exclusive conversations with Pandox reveal the company is actively eyeing the German market, seeing a window of opportunity while more aggressive capital - particularly from private equity - has yet to return.
It seems confluence of events could really breathe some life back into what has been a stagnant hotel market, with many seeing this the time to get in before the more aggressive funds move in.
Stress beneath the surface
And as challenges persist, many of them exacerbated by Germany’s broader political and economic malaise, small and mid-sized operators are feeling the pinch and these macro challenges are filtering down to the hotel sector. Fabian Zschweigert, Head of M&A Central & Northern Europe at B&B Hotels, is keeping a close eye on the German market, seeing the opportunities.
“What we've seen in Germany is massive headwinds on the operational side,” he says. “A lot of the operators were able to stay above water due to the increase in performance that we’ve seen, but this has really slowed massively this first quarter.”
The slowdown has had serious consequences: “We’ve seen an increase in the pace of bankruptcies and deals that were put together on the back of some financial pressure,” Zschweigert adds. “In terms of operator bankruptcies, I would watch Germany very closely.”
For active operators like B&B Hotels, the environment presents an opportunity for growth via acquisition. “We are very keen on growing through takeover transactions,” Zschweigert says.
Waiting for liquidity
While the UK hotel market has seen a flurry of transactions and revaluations, Germany continues to be relatively dormant.
“A challenge we’re seeing is that a lot of the big segments of the market in Europe haven’t necessarily unlocked,” says Kash Gohil, founding partner at Amante Capital. “There aren’t enough transactions in Germany. Valuations in Germany haven’t moved even though performance is very low. So there isn't necessarily a lot of liquidity in certain parts of the market, which we’re hoping comes back soon.”
This misalignment between operational performance and valuation is creating a stalemate: distressed assets exist but sellers are holding out for pre-pandemic pricing, while buyers wait for discounts that reflect today’s reality.
Wait or strike?
Against this backdrop, investors are faced with a choice: adopt a wait-and-see approach or move now to secure assets ahead of the curve. For those with the capital and risk appetite, early-mover advantage may prove valuable.
Germany’s fundamentals - strong domestic demand, a diversified economy, and a robust tourism infrastructure - remain intact. If economic conditions and the prospects for economic growth pick up in Germany, the hotel investment market could bounce back faster than expected.
As Duffey of JLL puts it: "Germany is gradually regaining its momentum in the hospitality market."
And research by Savills supports this recovery. Transaction volumes in Germany totalled €1.32 billion in 2024. Although this figure remains 61 per cent below the 10-year annual average, it represents a 7 per cent year-on-year increase and the first annual rise since 2022.
Germany’s hotel market is teetering between hesitation and opportunity. While the scars of the pandemic and subsequent stagnation are still visible, the potential is visible. Distressed assets and renewed investor interest hint at a market on the brink of revival—albeit one that requires careful navigation and strategic timing.
This may be the perfect moment to make a move - before the rest of the market wakes up.