Business Outlook 2025 | Hotels - Germany
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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.
Key Market Trends
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.
Market Sentiment
We anonymously surveyed hotel business owners across the country to gather their views on the year ahead.
Market Predictions for 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
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