German hotel market shows mixed sentiment as polarisation increases

The outlook for the German hotel investment market remains divided, according to the 13th HospitalityInside Investment Barometer, a survey conducted annually by Union Investment and HospitalityInside. The results indicate that expectations are recovering in some areas, while uncertainty persists in others.

The Development Index, which reflects perceptions of market and investment momentum, increased significantly compared to last year. Thirty percent of respondents now assess future development as good or very good, up from 17% in the previous survey.

In contrast, the Operations Index, which reflects expectations for hotel revenue performance, has continued its downward trend since 2023. Only 39% of respondents forecast positive revenue development, compared with 55% in the previous year, while 30% now expect weaker performance.

Despite this divergence, the combined results of the index survey point to a modest improvement in overall sentiment, with selective opportunities expected rather than broad-based growth.

Investor focus is shifting toward specific markets and hotel categories. Southern Europe continues to attract attention, particularly Spain, driven by strong demand in both leisure and business segments. Yield compression in Spain is increasing interest in Italy, while the DACH region (Germany, Austria, Switzerland) remains important for domestic investors.

There is also a clear polarisation in preferred hotel types. Investor interest is concentrated at both ends of the pricing spectrum — budget/economy hotels and luxury or lifestyle concepts — while the midscale segment faces stronger competition.

According to Andreas Löcher, Head of Investment Management Operational at Union Investment, concepts positioned in the budget and luxury segments are generally outperforming midscale hotels. He notes that midscale projects will require strong locations and well-recognised operators to remain competitive.

The survey gathered responses from hoteliers, investors, owners and consultants. Eighty-five percent of participants completed the survey, and 56% are primarily active in the DACH region. Data collection took place from 26 September to 28 October 2025.