Hotel investment is recovering, but capital is not returning evenly. Premium assets are attracting strong investor interest, while financing costs, refurbishment requirements and asset quality are creating a more complicated investment proposition elsewhere in the market.
Global hotel investment is entering a new phase. JLL says global transaction volumes in 2025 were 22% above the 2023 trough, with stronger debt markets, available capital and renewed investor confidence supporting further growth in 2026.
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
But the recovery is not uniform.
Premium properties are attracting considerable investor conviction, while lenders and buyers remain selective about asset quality, location and the capital required after acquisition. At the same time, transaction data suggest that the middle of the hotel market has hardly disappeared.
That creates a more interesting question than whether hotel investment is simply becoming polarised: what is investors’ growing selectivity actually selecting for?
Premium assets attract investor conviction
There is clear evidence of strong appetite for the premium end of the hotel market.
CBRE’s 2026 European Hotel Investor Intentions Survey, conducted among more than 70 investors in February and March, found luxury to be the most attractive segment, selected by 53% of respondents. More than 90% planned to maintain or increase their hotel allocations during 2026, while value-add remained the dominant investment strategy.
US deal activity also shows strong conviction towards the upper end of the market, although the pattern extends beyond luxury. PwC found that upscale, upper-upscale and luxury hotels together accounted for 73% of hotel transactions in the six months covered by its 2026 midyear outlook, the highest concentration in two years.
JLL’s global outlook similarly points to greater selectivity, with high-quality properties in prime locations attracting capital and luxury resorts and trophy assets remaining prominent investment targets.
But investment values alone can give a misleading impression of where activity is concentrated.
HVS recorded €9.4bn of European hotel transactions in the first half of 2026. Upscale hotels accounted for €4.3bn, or 46% of total investment volume, while luxury properties generated €2.4bn.
Yet only 34 luxury hotels were sold, compared with 97 midscale properties. The difference in investment value partly reflects the price of the underlying assets: luxury hotels averaged €514,000 per room, compared with €159,000 for midscale properties.
HVS also cautions that higher average pricing during the period reflected the higher quality of properties sold rather than a general increase in hotel values.
Capital may therefore be concentrating by value without transaction activity concentrating in quite the same way.
The middle has not disappeared
The European transaction figures provide an important qualification to the idea of a straightforward luxury-versus-budget investment market.
Midscale represented the largest number of European properties sold during the first half of 2026, according to HVS. There is also evidence that some middle-market formats continue to offer an attractive proposition to investors.
In the US, JLL identifies select-service and extended-stay hotels as a focus for investors seeking durable returns. Their appeal includes operational efficiency, resilient profitability and potentially higher yields. Lower capital requirements than full-service hotels can also broaden the pool of prospective lenders and buyers.
PwC makes a similarly important distinction. Its US analysis does not suggest that mid-tier hotels have stopped performing. Instead, it describes the middle as thinning in deal conviction, even while mid-tier RevPAR remains robust.
That distinction matters.
Strong hotel operating performance does not automatically produce an attractive investment proposition. Equally, an asset with physical or operational challenges can become attractive if its acquisition price and potential upside compensate for the capital and risk involved.
The question is therefore less whether investors are abandoning the middle than what makes one middle-market hotel investable while another struggles to attract capital.
The real dividing line: all-in capital requirements
Hotel classification can only provide part of the answer.
Consider two properties in the same midscale segment.
One has a strong location, recognised brand, efficient operating model, modern guestrooms and limited immediate capital requirements. Its cash flow is stable and it needs relatively little investment simply to maintain its competitive position.
The other has ageing rooms, deferred maintenance, a weaker proposition and a substantial refurbishment or property-improvement programme ahead of it. Its debt may also be approaching maturity, forcing the owner to address refinancing and capital expenditure at the same time.
On paper, the hotels belong to the same segment. From an investment perspective, they can be very different assets.
Financing conditions magnify that distinction.
In the UK, for example, debt availability has improved during 2026, but lenders remain selective. Christie Finance identifies refinancing as a major source of activity, with lenders focusing on cash flow, asset quality, location and operator strength. Prime hotels can typically obtain senior debt at 55–65% loan-to-value, while regional and secondary assets face more selective terms and lower leverage.
The UK should not be treated as a proxy for financing conditions globally. But it illustrates a broader investment problem: a hotel approaching refinancing while also requiring substantial capital expenditure has to support considerably more than its acquisition price.
For investors, the relevant calculation increasingly involves the all-in capital requirement: acquisition price, financing or refinancing costs, refurbishment and other required investment, weighed against sustainable operating cash flow, potential value creation and eventual exit value.
An apparently inexpensive hotel can therefore become an expensive investment if substantial capital is required merely to keep it competitive.
When pressure becomes opportunity
That calculation also explains why challenged assets are not necessarily unattractive investments.
JLL expects private equity to remain active in value-add opportunities, portfolio transactions and high-quality hotels available below replacement cost. Such investors are not necessarily looking for properties that already offer stable, optimised performance. They are looking for situations where capital, operational changes or repositioning can create value.
The strategy can involve acquiring an underperforming hotel, refurbishing or repositioning it, improving its operating performance and subsequently refinancing or selling the asset.
That makes the distinction between a challenged asset and a bad investment important.
An ageing hotel requiring significant expenditure may be unsuitable for a core investor seeking predictable income. The same property could interest a value-add investor if its acquisition price adequately reflects the required capital, execution risk and potential uplift.
Price therefore changes the investment proposition.
The opportunity in the middle of the market may not lie in finding hotels without problems, but in identifying properties where the gap between current and potential performance can be closed at an acceptable cost.
No single global investment hierarchy
The pattern also varies between markets.
Europe offers strong evidence of selective investment. HVS found that fewer hotels and rooms changed hands during the first half of 2026 even as average pricing increased, partly because the properties sold were of higher quality. Cushman & Wakefield likewise found that European investment remained above its long-term average while the number of transactions declined, with deals above €100m increasing 30% year on year.
The US offers stronger evidence of deal concentration towards upscale and premium segments. Yet the investment appeal of select-service and extended-stay hotels complicates any simple argument that capital is choosing only the highest and lowest ends of the market.
Asia-Pacific provides another useful counterpoint. Midscale was the fastest-growing chain scale in the APEC hotel development pipeline in the first quarter of 2026, with project numbers increasing 26% year on year and rooms rising 21%.
Development pipelines are not directly comparable with hotel transaction data and should not be interpreted as equivalent evidence of investor appetite. But the growth nevertheless suggests that the middle of the market is far from being structurally abandoned. Higher-end segments are expanding at the same time.
There is therefore no single global hierarchy in which one hotel segment universally wins and another loses. Location, demand, supply constraints, financing conditions, operating efficiency and development economics can matter as much as chain-scale classification.
What investors are really paying for
The evidence instead points to a market in which investors are placing greater emphasis on the relationship between the price they pay, the capital an asset requires and the value it can ultimately produce.
Can the hotel generate resilient cash flow? How much immediate investment does it require? Can room rates grow? Is its location resilient to changes in demand and supply? Does the brand strengthen its competitive position? What will refinancing cost? Can the property be repositioned? And what might it ultimately be worth at exit?
Hotels in the same segment can produce very different answers.
Luxury assets can offer pricing power, scarcity and strong demand from affluent travellers. Efficient select-service and value-oriented properties can offer attractive operating economics and lower capital intensity.
The greatest pressure may therefore fall elsewhere: on properties that lack sufficient differentiation or pricing power while carrying high refurbishment, financing or operating costs.
That does not mean investors have stopped buying them.
It means they need a clearer reason to do so.
The missing middle of hotel investment may therefore not be a segment at all. It may be the gap between what an asset needs to remain competitive and what investors believe that investment will ultimately be worth.
