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The cautious mood in German hotel markets this spring has turned into real momentum over the summer. Investment reached €830 million in the first half of 2025, proving earlier predictions right while showing how the market has changed - operators are now the ones driving deals and expansion across the sector.
Foreign buyers still dominate, taking between 61% and 86% of deals depending on how you measure it, but they're not just picking up bargains anymore. They're building platforms and rolling out brands systematically. The €150 million sale of Munich's Mandarin Oriental shows the size of individual deals now getting done, while hotel chains reshape supply across multiple segments.
The numbers back up investor confidence. German hotels hit 496 million overnight stays in 2024 - beating pre-pandemic levels and ranking second in Europe. Property values climbed to €152,000 per room, up 4.8% and the first time they've topped 2019 levels. The total market for investment-grade hotels grew 3.7% to €64.3 billion, reflecting better operations and selective new supply.
"The return of institutional investors shows that confidence in the hotel asset class is continuing to strengthen," said Stefan Giesemann, Managing Director of JLL Hotels & Hospitality Group. Munich and Berlin captured €438 million of first-half activity, with both cities benefiting from big deals and steady hotel performance.
Hotel chains have accelerated growth dramatically since spring, with established operators rolling out ambitious expansion programmes using conversions and partnerships. B&B Hotels showed the most aggressive growth, adding 43 hotels with around 3,800 rooms over twelve months - nearly 20% growth. The French chain now runs 227 hotels with 23,200 rooms across Germany, making it the country's largest hotel brand while targeting 240 properties by year-end.
"The German hotel market remains in flux. The budget and economy segment in particular continues to be dynamic, both in terms of new openings and rebranding as well as brand developments," explains Ulrike Schüler, Head of Germany at PKF Hospitality Group. Much of B&B's growth came from buying 30 former Ibis Budget properties from AccorInvest through BC Partners and Hova Hospitality.
Premier Inn's UK parent Whitbread has put £1.1 billion behind German expansion, securing 100 locations with roughly 20,000 rooms across more than 30 major cities. The chain showed exceptional five-year growth, expanding 170% from 23 to 62 hotels since March 2021. Plans include 33 more hotel openings, backed by the brand's proven approach of tight control and standard service.
IHG's partnership with Novum Hospitality keeps generating results through the Garner brand rollout. They're targeting around 50 hotel conversions by year-end, bringing the previously US-focused Garner brand alongside Candlewood Suites to German markets. Holiday Inn niu doubled from 22 to 45 hotels during the five-year period, showing sustained expansion across IHG's brands.
Platform building has become a big trend, shown by ActivumSG's majority purchase of Centralis. The partnership targets €500 million in modern hospitality properties, focusing on serviced apartments and tech-enabled operations. "With ActivumSG, we can scale Centralis faster and expand our position as a leading investor and developer in the increasingly institutionalised asset class of modern hospitality," said Dr Fabian Vieregge, CEO and co-founder of Centralis.
Serviced apartments offer particular growth potential, making up nearly 30% of new guest rooms while hitting 81% occupancy at €91 average daily rates. "During the pandemic, the segment has positioned itself as a confident winner due to its crisis resilience," noted Martin Schaller, Head of Asset Management Intercontinental at Union Investment. Chains like Numa, Stayery, and Limehome are expanding fast with digital-focused operations.
Building constraints keep driving conversion activity, with 10% of new hotel rooms created through repositioning projects in 2024. Office-to-hotel conversions have picked up steam, like Union Investment's €10 million conversion of former Deutsche Pfandbriefbank space in Unterschleißheim into 93 B&B Hotel rooms. Similarly, NordLB's old Hanover location is becoming 200 Motel One rooms, with the former cash hall turned into lobby and bar space.
"I expect that in the coming years, many vacant spaces will be converted into apartments or hotels," said Suat Kurt, JLL branch manager, talking about Frankfurt's 10% office vacancy rate. The trend shows how property owners are turning to hotels for buildings that no longer work as traditional offices.
Helena Rickmers, Head of Hotel Investment at CBRE Germany, says it's bigger than individual deals. "This confirms the results of two surveys conducted by CBRE among investors and lenders, which had already shown that hotels are becoming more important for both equity and debt capital sources," she explained. That suggests systematic interest from both equity investors and lenders.
Performance numbers support conversion economics. Around 80% of hotel rooms completed in 2024 meet institutional investment standards, much higher than previous years. This reflects tougher development criteria and better operator quality that matches what institutional capital wants.
Prime yields stayed stable between 4.7% and 5.5% in the first half, with top properties in prime locations still commanding premium prices. Some deals have broken through the psychological barrier of 20 times earnings, showing confidence in long-term performance and property appreciation.
REFIRE: The German hotel investment market has moved from recovery to active expansion, driven by operators executing real growth strategies rather than just opportunistic buying. The €830 million first-half volume represents genuine momentum backed by record performance and selective new supply. Institutional investors should see that brand-led consolidation is creating platform opportunities while conversions solve traditional development problems.
Foreign capital dominance suggests domestic institutions might be missing out on a sector showing resilience, inflation protection, and steady cash flows. The mix of operator expansion, conversion economics, and sustained tourism demand creates compelling opportunities, especially for capital seeking exposure to Germany's recovering hospitality sector through established platforms and proven operators.
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