A report by real estate data collation and research firm CoStar says that the appetite for new investments in hotels in Europe has continued to grow, despite the war in Ukraine, record-high inflation and even signs of a recession.

Investors in hospitality sector have continued to pump in money in the hotel sector in Europe due to rising demand for new hotels. The optimism is remarkable in view of the record-high inflation that has plagued most of the world this year, with signs of an oncoming recession in Europe and even the Russia-Ukraine War.

According to CoStar, a real estate data and technology research company, hoteliers in Europe the region say travel demand is likely to remain broadly resilient. In a report, CoStar says that demand for midscale hotel segment is rising particularly rapidly.

Speaking at the recently held Alvarez & Marsal’s European Hospitality Investment Conference, Willemijn Geels, vice president of development for Europe at IHG Hotels & Resorts, said 35 pc of the company’s signings are in the midscale segment.

“There is big demand for midscale [hotels] with families, such as for Holiday Inn, Voco and extended stay. These brands are very resilient, and they have proven again that it is an interesting model both from operational and investment viewpoints,” she said.

CoStar goes on to say that even though costs are increasing in Europe faster than other global regions, it hasn’t been enough to slow down investor interest. “The bid-ask spread was the big issue two months ago, but things have changed in terms of monetary policy,” says J Pedro Petiz, Managing Director of London-based Avington Financial, adding that the buyer and seller expectations were beginning to converge.

Hotel groups like the French giant Accor have been reporting record profits. Chief Financial Officer and Deputy CEO Jean-Jacques Morin pointed to high demand and pricing power as reasons his company has surpassed pre-pandemic performance.

“The business profile of Accor is today more resilient than ever.… In September and October, we did confirm the return of corporate bookings in meetings, incentives, conventions and expositions,’’ he said during the company’s third-quarter earnings call.

However, the rising inflation has pushed up lending rates and that has made getting finance expensive.

“Financing will be expensive, and loan to value likely will go down, so if you add all these, [the industry] will likely slow down. One thing that worries me is that pricing is going up,” Accor CEO and Chairman Sébastien Bazin said at the European Hospitality Investment Conference.

However, CoStar says that for the time being, though, there is no lack of investment appetite in the region.

Mexico’s Palace Resorts recently expanded into Italy with acquisition of Baglioni Hotels & Resorts.

“We invested in this great Italian collection for many reasons, starting with the kindness and great execution ability of its staff both in and out of the hotels,” Gibran Chapur, Palace Resorts’ executive vice president, said in a statement.

Portuguese development firm Mercan Properties Group also recently signed a Eur 107.8 million deal to build two Hilton-branded hotels in The Algarve. “The agreement now signed with Hilton is a proof of the development and interest that the city of Lagos has generated,” said Jordi Vilanova, president of Mercan Properties Group.

Similarly, Spain-based Iberostar Hotels & Resorts also inked a deal to add 70 hotels, including many in Spain, Southern Europe and Northern Africa, into IHG Hotels & Resorts’ loyalty platform.

“Hotels are highly serviced but do not have much personality. The younger generation want a sense of place and more service on demand, so we wanted to combine the two and have a product where you can stay for a day, a week, a month or a year. Why limit anyone?” Naomi Heaton, CEO and founder of The Other House, said at another industry conference.

However, within the UK hoteliers remain sceptical about the economic prospects, adds CoStar. It says that Kate Nicholls, CEO of the hotel advocacy organisation UKHospitality, said she’s particularly concerned about a tax holiday on the industry that is set to expire.

“The bill would be an increase of 900 million pounds sterling, on top of the 2.7 billion pounds sterling the sector should be paying in business rates if there was not a holiday,” Nicholls said.