Investing in the hotel real estate market

Tourism in Italy is currently experiencing a golden era, with strong demand, record-breaking statistics, and innovative concepts emerging.

If 2023 was the year in which Italian tourism rebounded to surpass pre-pandemic levels, 2024 promises to set new records for the sector. According to Assoturismo Confesercenti, the summer season alone is expected to host 216 million stays in Italy, marking a 1.5% increase compared to the same period last year. This positive trend is supported by Str CoStar data, highlighting that the highest growth in hotel performance in Europe in 2023 was hit in Italy.

Beyond being a significant driver of the Italian economy, contributing 13% to the national GDP, tourism is also emerging as one of the most dynamic segments in the Italian real estate investment market. Investors are increasingly focusing on the hospitality sector, engaging in value-add operations, acquiring income-generating properties, or rebranding existing establishments.

The 2024 report on the hotel real estate market by Scenari Immobiliari in collaboration with Castello SGR indicates that investments in this sector totaled 1.4 billion euros in 2023. Although slightly below the 1.7 billion euros recorded in 2022, this figure reflects strong investor confidence amidst ongoing economic uncertainties. And forecasts for the current year signal continued robust interest in this asset class.

A market with tremendous potential

The appeal of travel knows no crisis, even during the most challenging times, making hospitality one of the most resilient sectors in real estate. After a prolonged hiatus due to the pandemic, tourism has not only rebounded strongly but is also achieving record-breaking performances. This growth is driven by a steadily increasing demand, solidifying Italy's position among the top global destinations, as highlighted in the Travel Trends 2024 report by the Mastercard Economic Institute.

According to the Italian Hotel Monitor di Trademark Italia, the first quarter of 2024 witnessed substantial growth in the Italian hotel industry compared to the previous year. The room occupancy rate increased from 62.7% to 65.3%, marking a rise of 2.6 percentage points. Cities such as Milan, Bologna, Palermo, Trento, and Trieste stood out with occupancy rates surpassing the national average. Concurrently, the average daily rate climbed from 115.55 to 127.10 euros, reflecting a 10% increase. Venice maintains its status as the most expensive city, with an average nightly rate of 207.50 euros (+3.3% from last year). These figures are particularly noteworthy when compared to 2019, a benchmark year for tourism, showing a 5.5% rise in room occupancy and a 30% increase in average prices.

Geographical diversification

Investing in Italy's hospitality sector offers significant benefits through geographical diversification. The country's tourist appeal spans from north to south, encompassing major cities and quaint villages alike. Beyond iconic places like Florence, Rome, Venice, and Milan, which dominate in terms of investment volumes according to the 2023 Italian Hotel Investment report by EY, there is growing interest in secondary and strategically positioned cities with robust public transport networks.

Considering upcoming international events such as the 2025 Jubilee in Rome and the Milan-Cortina 2026 Winter Olympics adds to the investment allure. Milan, in particular, is emerging as Italy's new tourism hub, attracting millions of visitors annually (8.5 million arrivals in 2023, source: Municipality of Milan). Its year-round appeal is bolstered by prestigious events like the Salone del Mobile and the Fashion Week, alongside a strong presence of multinational corporations that draw expats and business travelers to the city.

The hotel sector's most coveted products

Investments in Italy's hotel sector are heavily skewed towards luxury offerings, not just focusing on existing structures but also transforming historical buildings into hospitality venues. This trend reflects Italy's leading role in high-end European tourism, as highlighted in a survey by Enit-Unioncamere, which reveals that foreign tourists choose for Italy for its exclusive experiences.

Resorts emerge as one of the most sought-after property types, representing approximately 40% of all investments in 2023 (source: Scenari Immobiliari and Cartello SGR report).

Despite their seasonal nature, resorts have shown remarkable resilience in the face of the pandemic, thanks to heightened demand in leisure travel and a growing trend towards extending the tourist season.

Another expanding segment is aparthotels, a hybrid product blending hotel amenities with the comfort of private apartments. They are gaining popularity for their flexibility in accommodations and ability to deliver a more personalized guest experience.

The market beyond traditional hotels

The non-hotel segment is proving to be dynamic and filled with interesting opportunities. One of the most popular investment strategies involves purchasing of homes for short-term rentals. This practice has gained considerable traction as an alternative to conventional leasing, especially in urban centers and tourist hotspots, fueled by the rapid growth of platforms like Airbnb and HomeToGo.

Simultaneously, there's been a notable surge in investments within the outdoor sector, which saw a record 68.6 million stays in Italy last year (source: Threads). Particularly noteworthy is the rise of glamping as a rapidly expanding asset in alternative investments. This exclusive offering combines the immersive experience of direct contact with nature with the luxury services typically associated with a five-star hotel, appealing to a diverse range of customer segments.