Traditionally one of the most operationally intensive parts of the real estate market, hotels are now struggling under rising labour, construction and other operating costs, with the exceptional rate growth that followed the COVID-19 crisis beginning to moderate in parts of Europe.
Rather than undermining the long-term investment case, it increases the importance of selecting the right asset, market and operating structure. “Construction costs alone are up 30 percent to 40 percent since 2019,” says Zsolt Kohalmi, global head of real estate and co-CEO of Pictet Alternative Advisors. “New supply is very limited, but that scarcity helps against a fair bit of the cost inflation.”
For investors, therefore, the question is less about whether costs are high, and more about whether a hotel has sufficient pricing power, operational efficiency and supply protection to absorb them. The current cost environment has not invalidated the long-term hotel investment case, but i
