European hotel transaction volumes exceeded €11.5 billion in the first half of 2026, putting deal flow 22% above the 10-year average even as activity slipped 9% year-on-year, according to Cushman & Wakefield's European Hotels Update.

RevPAR across the continent grew 3.0% year-on-year over the same period, driven almost entirely by rate: average daily rate rose 2.2%, while occupancy added a more modest 0.5 percentage points. Growth was broad-based, with 22 countries posting RevPAR gains and only four markets declining.

Where is performance coming from?

Southern Europe and Central & Eastern Europe led demand expansion, while mature Western markets continued to grow at a slower pace. The report attributes the momentum to sustained tourism demand despite heightened geopolitical uncertainty.

The performance story is rate-led rather than occupancy-led — a dynamic that favours operators' margins, since incremental ADR flows through to GOP with far less cost attached than filled rooms requiring staffing and amenities.

Are hotel profits holding?

Not uniformly. Full-service branded hotels posted average GOP PAR of €97.6, up 1.0% year-on-year. But profitability growth was recorded in only half of the urban markets analysed, meaning cost pressure — labour chief among the line items hotel operators control least — is still eroding gains in major cities even where top-line revenue is rising.

The split matters for owners weighing brand affiliation: full-service branded assets are defending profit levels, but the improvement is concentrated rather than universal across gateways.

What is capital buying?

Investors are paying up for the top of the market. Luxury and Upper-Upscale hotels accounted for 46% of H1 2026 investment volume.

• Luxury assets traded at an average €522,000 per room
• Upper-Upscale assets traded at €364,000 per room
• Price per room across all transactions rose 9% year-on-year
• Deals above €100 million increased 30% by count

The 30% jump in large-ticket transactions signals institutional capital returning to the sector in size, with the decline in overall deal count pointing to a market consolidating around bigger, higher-quality assets rather than fragmenting across smaller trades.

What is holding yields back?

Prime hotel yields stayed largely flat in H1 2026, supported by strong investor appetite and resilient operating fundamentals. Elevated financing costs and geopolitical uncertainty continued to prevent further compression.

That stability cuts both ways. Sellers gain confidence from unchanged yields and rising per-room pricing, but buyers face a cost of debt that limits how far they can bid — a constraint that has kept the market trading around, rather than above, its long-run average pace despite record per-room pricing at the luxury end.

What comes next?

The combination of rate-led RevPAR growth, flat prime yields and a 9% year-on-year rise in per-room pricing suggests pricing power remains with owners of well-located, upper-tier assets going into the second half of 2026. Whether transaction volumes rebuild toward their recent peaks will depend largely on financing costs easing enough to let buyers underwrite the per-room prices sellers are now commanding.

The full report is available for download via Cushman & Wakefield's site.