Improving investor mood but fragile hotel performance mean careful selection and cautious underwriting are vital in the German hospitality market. / Credit: Travel Faery via Shutterstock

Germany’s hotel investment market is showing signs of revival in 2025, with more capital flowing back into properties and portfolio deals after several muted years.

At the same time, the Germany hotel industry outlook remains fragile, as rising costs, softer revenues and tighter financing conditions keep pressure on hotel operators and lenders.

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Cautious optimism in the German hotel investment market

Transaction figures suggest that the German hotel investment market has moved past its low point.

Consultancy Cushman & Wakefield reports that hotel transaction volume in Germany reached around €1.58 billion between January and September 2025, an increase of roughly 68% compared with the same period in 2024, although still below the long-term average.

Prime hotel yields have stayed stable at about 5.5% since late 2023, indicating that pricing for high-quality assets has settled for now.

Most recent deals in Germany hotel investment have involved single assets rather than large portfolios, and almost two thirds of volume has been concentrated in the country’s seven largest cities:

Berlin, Munich, Hamburg, Frankfurt, Cologne, Düsseldorf and Stuttgart. Munich and Berlin in particular have continued to attract both domestic and international capital, reflecting their strong mix of business, trade fair and leisure demand.

Survey data paint a similar picture of cautious optimism. The latest HospitalityInside Investment Barometer, produced with institutional investor Union Investment, shows that the Development Index – a measure of sentiment on new projects and refurbishments – has recovered the ground lost last year.

Around 30% of respondents now rate development conditions as good or very good, up from 17% previously, signalling that more projects are again seen as viable.

For global hotel groups and owners, this suggests that the pipeline in the german hotel investment market is slowly reopening, especially in core city locations and for clearly branded products.

Operating pressures weigh on Germany hotel industry outlook

Behind stronger investment numbers, the operational picture for hotels in Germany is less encouraging. A nationwide survey by industry association DEHOGA found that hospitality revenues fell by 9.3% in July 2025 compared with the same month a year earlier.

Nearly a third of businesses rated their booking situation for August and September as poor or very poor, while only about a quarter described it as good or very good. Around 40% of hotels and restaurants fear they will make a loss this year.

The main drag on the Germany hotel industry outlook is the combination of weaker real consumer spending and sharply higher costs. Operators report rising bills for labour, food, beverages and energy, while guests are becoming more price-sensitive.

Many properties are maintaining or lifting average daily rates to protect margins, but that strategy is harder to sustain as economic growth slows and domestic leisure demand softens.

Survey evidence also suggests growing polarisation within the german hospitality sector. While the Development Index has improved, the Operations Index – which tracks expectations for revenue and trading conditions – remains subdued. Fewer respondents expect strong revenue growth than a year ago, and more anticipate weaker turnover.

This divide means that, even as investment activity picks up, lenders and investors are paying closer attention to cash flow resilience at the individual hotel level.

Selective strategies for hotel investors in Germany

The recovery in Germany hotel investment is not evenly spread across segments.

Market reports and brand data point to stronger performance at the two ends of the spectrum: lean budget and economy properties on one side, and luxury or lifestyle hotels with clear differentiation on the other.

Midscale hotels without a distinctive concept or brand, especially in secondary locations, face more intense competition and have less scope to push room rates.

Germany is also seeing a significant pipeline of new branded rooms. One recent market snapshot estimates that more than 15,000 new rooms are due to open in 2025 within major hotel chains alone, alongside a series of re-openings and rebrandings in key cities.

For international investors, this means that supply growth in some urban sub-markets will require careful analysis of occupancy, rate trends and competitive positioning.

Against that backdrop, many hotel investors in Germany are adopting more selective strategies:

• focusing on core city locations with diversified demand, such as Berlin, Munich and Hamburg
• prioritising hotels with strong brands, proven operators and robust revenue management
• favouring budget and economy assets with efficient cost bases, or high-end hotels with clear pricing power
• stress-testing business plans for further cost increases and only gradual demand growth

Germany remains one of Europe’s largest hotel markets by room count and overnight stays, and its central position within the continent keeps it on the radar of global capital.

Yet the message from current data and surveys is clear: investors are returning to german hotels, but risks remain high enough that capital is being deployed cautiously.

For international owners and operators, success in the German hotel investment market in 2025 will depend less on broad market momentum and more on disciplined asset selection, realistic revenue expectations and tight control of operating costs.

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