Hotels Germany
In this section, we explore the German hotels market in 2024 and provide predictions for the sector in 2025.
Market Overview
In 2024, we saw a noticeable upswing in transaction volumes across the German hotel investment market. This was a significant improvement on 2023, when buyers and sellers adopted a ‘wait and see’ approach due to the disparity in pricing expectations driven by escalating capital costs.
However, while the European hotel investment market had picked up by 62% in the first half of the year, Germany was struggling to keep up with this pace, achieving a pickup of 42% in hotel transactions during the same period.
A number of factors are driving this trend and are the reason behind this gap. Hotel demand characteristics, performance development, as well as standards in German hotel operator contracts, are amongst them.
The good news is that we are heading into 2025 with a more stabilised prime yield of 5.25%, which is comforting buyers and managing sellers' pricing expectations.
Over the past 12 months, our team has been involved in numerous projects, both on the advisory side with several market and feasibility studies as valuations, and on the brokerage side with various successful operator searches and sales mandates for business and leisure hotels throughout Germany.
Lukas Hochedlinger
Managing Director Central and Northern Europe
Key Market Trends
As of 31 March 2024 compared with figures taken on 31 March 2023:
Continued Tourism Recovery
In 2024, the German tourism industry experienced a remarkable increase compared to the previous year. The total number of overnight stays from January to October reached a record of 433 million, surpassing the previous high set in 2019. The growth was driven by both domestic and international visitors, with a significant 2.31% increase in the number of guests in October 2024 compared to October 2023. This positive trend highlights the resilience and attractiveness of Germany as a top travel destination, and this upward trajectory is set to continue into 2025.
Politics
Germany is currently experiencing significant political turmoil. The coalition government led by Chancellor Olaf Scholz has collapsed following the dismissal of Finance Minister Christian Lindner. The political landscape is marked by deep divisions and a lack of consensus on key issues, such as economic policies and support for Ukraine.
Looking to 2025, Germany faces several challenges. An early federal election is expected, likely in February or March, and the political outlook is uncertain, with rising support for populist and far-right parties. Economic issues, including high energy costs and labour shortages, will continue to be major concerns. The outcome of the upcoming elections will be crucial in determining the direction of Germany's policies and its role in the European Union.
ESG
Sustainability and ESG (Environmental, Social, and Governance) have significantly ascended the priority list for hotel investors in the past 24 months. This trend is particularly pronounced among institutional investors and corporate lenders, for whom the absence of any certification would raise concerns. To a lesser extent, this shift has been observed among local/regional investors and banks.
Hotel Transactions
Non-active institutional buyers – although Q4 saw some institutional activity, overall sentiment amongst this group of buyers remains very hesitant regarding the German hotel investment market.
Opportunistic buyers are leading the market – the most active group of investors are still private equity and multi-family offices. However, with a remaining gap of pricing expectations, deal-making is key.
Conversions – while newly developed hotels are still a rarity, we have seen a large amount of conversions of mostly office buildings. However, the conversion rate of projects remains still low due to legal limits and construction costs. One factor to be noted is that mixed-use developments are becoming a trend to revive areas.
Market Sentiment
We anonymously surveyed hotel business owners across the country to gather their views on the year ahead.
Market Predictions 2025
- Falling inflation below the 2% target in Germany and other European countries will lead to further interest rate cuts to stimulate transactional activity in 2025
- Price finding between sellers and buyers is converging, as evidenced by higher transaction activity and investor interest in 2024. We expect to see an uptick in 2025
- The strong ADR growth in the period 2021 to 2024 will slow, and the development of hotel performance will be driven by an improvement in occupancy
- The outlook for 2025 is more optimistic, with GDP growth forecast to increase to around 1.0% (0.1% in 2024), as real wage growth will drive domestic demand
- To offset rising costs without compromising customer service, digitalisation will become increasingly important for hotel operators
Case Studies
NH Munich City Süd, Munich
Acting on behalf of the Spanish NH Group, we successfully identified a German/UK based owner-operator/PE fund to acquire the hotel (162 rooms) in Munich, looking to convert it into student housing.
Zählwerk Apartments, Pfaffenhofen
Situated in the outskirts of Munich with excellent connectivity for northbound travellers, this apartment hotel, built in 2021, has been acquired by the Coffee Fellows hotel chain—a spin-off of the famous German coffee place brand. The hotel will undergo a soft rebranding and continue operations under new leadership. The sale was instructed by a Munich-based family office.
eec Center, Rheine
As part of a 50,000 sqm development in the center of Rheine, near the German/Dutch border, Christie & Co led the Operator Search & Selection for a 100-key hotel on behalf of a Bavarian developer. The successful process resulted in the emerging operator Juststay being selected as the chosen candidate.