A select group of top-tier investors recently convened behind closed doors at the International Hospitality Investment Forum (IHIF) EMEA in Berlin.
The private meeting led to a dynamic exchange of ideas and insights as they explored the challenges and opportunities of the hotel investment market.
Here are the key takeaways.
ESG moves to the background for different reasons in different regions
As a topic within hospitality investment circles, ESG has been superseded by artificial intelligence and geo-politics.
One participant said: “It’s no longer a hot topic. It’s become part of daily life.” Within the EU, ESG is a regulated and embedded part of hotel development and financing, under the Sustainable Financing Disclosure Regulation and the EU Taxonomy. Lenders and investors now treat ESG compliance as routine and the cost of debt can be 30 bps lower when projects meet defined sustainability KPIs.
In the US, the situation is very different. ESG adoption is voluntary. “Obviously politics has had an impact on this and [the Trump administration] has changed the US mindset,” said an investor. Indeed, several US states have passed anti‑ESG laws that directly affect how public pension funds can invest. The investor added: “We are taking a measured approach. We do it where we can get a return; but in many cases it’s very difficult to get a return.”
Across Asia, the lending landscape is more varied but still voluntary. Singapore is emerging as a regional leader in ESG‑focused financing.
One participant said ESG initiatives had had no discernible impact on average daily rates at her hotels, while another said that a survey of his customers showed they were not willing to pay more for ESG features.
Owners brace themselves for more external shocks and rising costs
“Within a five-year business plan, there are just more shocks to the system and more things outside of our control,” said one investor.
“The government sets a policy or something happens that pushes our exit timing back by a couple of years. UK government policies changed our cost structure completely within one year.”
And the fallout of the US-Iran war is only going to add more inflationary pressure. “Hotel owners are fighting for survival,” said another speaker.
What can be done? Automation can help to a degree: “Instead of a physical person doing a room check, an AI housekeeper will analyse a photo to discover what is missing, like a spoon next to the coffee cup. I think everybody needs to move their business in a different way.”
Hotel values under pressure
A market correction is anticipated. Hotel values have been artificially inflated in recent years, said another investor, because government policies propped up assets during COVID that would otherwise have failed, and the post‑pandemic surge in ADRs created an over-heated perception of value.
As operating costs continue to climb, the bid–ask gap, which was “huge” three years ago, has since started to close and should narrow further, participants heard.
Pricing elasticity is limited
During the post‑COVID rebound, operators were able to push rates aggressively, but that headroom has now been largely exhausted. Travellers are already absorbing higher airfares, fuel costs and general inflation, and many are beginning to question the value proposition.
The ultra‑luxury segment is the exception, but even here, high prices may not be acceptable everywhere.
“Italy seems to be the only country in the world that has 11 different markets that can each charge more than €1,000 a night. Maybe the Maldives too, but that's not a proxy for the rest of the world.”
Italy also has one of the lowest penetrations of branded hotels, commented another speaker: “It may be one of the only markets where you still have personalised, genuine hospitality with a family in the background.”
Hotels cannot follow airline example
In the early days of the US-Iran war, airlines raised fares sharply, in some cases doubling long‑haul prices. But hotels are rarely at liberty to take such action.
“We would like love to increase rates, but you have to have the opportunity, and you have to have the market surroundings, and we are different to the airline industry where, in many cases, airline schedules have been reduced.”
Hotel supply in Dusseldorf and Frankfurt, for instance, has increased by 20 to 25 per cent over the last five years, said the investor, which erodes pricing power.
Tensions between owners and asset‑light brands are growing; franchise and management fees are increasingly seen as unsustainable, and participants argued they will have to come down.
Hybrid real estate concepts can be an alternative to pure hotel assets
By combining or repositioning hotels with extended‑stay, co‑living, or multifamily accommodations, owners can tap into different demand profiles and capital markets.
“We are taking a hotel and transferring it into a studio, living environment. You'd be surprised by what happens. Suddenly, occupancy is going up, opex is going down, your cap rate is going down; your cost of acquisition goes down. So, it's quite an interesting experience,” said one investor.
The proliferation of hybrid real estate models can be seen as a response to the mounting pressures on traditional hotel economics.
More distressed hotel assets coming to market
The availability of distressed hotel assets is expected to increase. The insolvency of white-label operator Revo Hospitality Group in Germany at the start of 2026 exposed the challenge of paying rent on fixed long-term leases during a prolonged period of rising costs and shrinking margins. The portfolio of 175 hotels is attracting interest from both existing owners and new partners, according to the self-administrators.
Deal activity has been muted for four to five years, but the latest Hospitality Investor Sentiment Index suggests movement: stock availability is increasing, brokers and lawyers are busier, and competitive under‑bidding is more common.
Yet this competition is often misleading, said one participant. Many deals rely on a single top bidder paying a premium, typically 20 percent, while the layer of buyers beneath is thin, meaning liquidity is fragile. “It's a measure of how more expensive things are, I suppose.”
More distressed hotel assets in the US will have an influence on the market as a whole. At the same time, more investors, especially family offices, are taking an interest in hotels.