In recent years, Italy has become even more attractive to foreign investors. Demand, including for hotel real estate, exceeds supply. The hotel market in Italy is thriving as the tourism industry continues to rebound after the pandemic, with a full recovery of American tourists and travelers from Asia expected soon.
Italy is once again hosting major international events, such as the highly-anticipated 2026 Winter Olympics, scheduled to take place from February 6 to 22 in Milan and the picturesque Cortina-d’Ampezzo ski resort. The hosting of such a prestigious event is expected to have a significant impact on the Italian hotel market, driving both demand and investment opportunities.
Let’s conduct a comparative analysis of how the hotel real estate market in Italy has changed over the past 5 years.
Italian Hotel Real Estate Market in 2019 Overview
Despite increased interest from foreign investors in 4 and 5-star hotels, nearly half of all offerings in the Italian market were 3-star family-run hotels in 2019. This dominance of 3-star hotels was influenced by various factors, such as affordability and the appeal of family-run establishments. However, the landscape has evolved significantly since then.
In 2019, budget hotels and guesthouses accounted for 25% of the market, while 5-star hotels represented only 2%. However, significant deals such as Belmond LVMH Oaktree Boscolo, The Dedica Anthology, and Covivio paved the way for major investments totaling 3 billion euros.
In 2019, Venice led in terms of key indicators like ADR (average daily rate) at 235 euros (164 euros RevPAR – revenue per available room), followed by Rome and Milan. The highest occupancy was recorded in Florence at 74.2%, followed by Milan, Venice, and Rome.
It’s interesting to note the price difference for rooms in 4 and 5-star hotels in Italy in 2019: ADR in Milan was 139 euros for a 4-star hotel and 310 euros for a 5-star hotel.
The most expensive rooms in Italy in 2019 were sold in Capri for 990 euros and in Venice for 930 euros. In Milan, the maximum room rate was 670 euros, and prices in Rome were even lower.
State of the Italian Hospitality Market in 2023
According to a report from the well-known Italian online portal Il Sole 24ore for the first half of 2023, investors are not deterred by the increase in bank interest rates for loans, and they are actively searching for hotels in need of renovation and reconstruction.
Meanwhile, prices for rooms in luxury hotels are rising steadily, despite lower occupancy rates. In Milan, the average tariff for a room in top 5-star hotels such as Mandarin, Bvlgari, Armani, Four Seasons, and Hyatt reached 1300 euros compared to 670 euros in 2019, with occupancy rates dropping from 71% to 59%.
Initially, hoteliers tried to increase occupancy to 65-70% before raising prices. On average, a hotel occupancy rate of around 60% is considered the minimum acceptable level for the hotel business. But today, in Italy and Europe, the luxury segment has achieved unprecedented room rates despite low occupancy. The same situation is observed in Sicily in Taormina, Capri, Liguria, and Sardinia.
New openings of the Luxury Hotels in Italy
In 2021 and 2022, the largest hotel deals were made for Luna Baglioni Venezia, Pellicano Argentario, Majestic Roma, and the opening of Novu, Corinhtia, Rosewood, Four Seasons, Mandarin, Baccarata, Orient Express is expected until 2024, and this is just in Rome. In Milan, there’s Edition, JK Place, Aman, W, Sogo, Hotel Rocco Forte, and Baglioni.
The long-awaited opening of the Bulgari Hotel in Rome
In June 2023, a significant event in the world of hospitality took place – the opening of the new luxury Bulgari Hotel Roma on Augusto Imperatore Square 10, right in the heart of Rome, just steps away from the Spanish Steps and the historic Bulgari boutique. Strangely, there was no Bulgari hotel in Rome, the hometown of the luxury brand until now. The hotel features 114 rooms, a restaurant by Michelin-starred chef Niko Romito, a Bulgari bar on the top floor with a terrace offering breathtaking views of the Eternal City, a magnificent 1,000-square-meter spa with an indoor pool, a state-of-the-art fitness center, event spaces, and a unique library dedicated to the world of jewelry. The grand opening of the Bulgari Hotel in Rome was accompanied by an incredible drone show involving 200 drones that illuminated the sky over the Eternal City.
After a seven-year absence, the luxury brand IHG Hotels and Resorts has returned to the Italian capital. InterContinental Rome Ambasciatori Palace also opened its doors, with a 2.5-year renovation costing approximately 45 million euros.
As a result, the share of 5-star hotels in Italy has already reached 5%, accounting for 30% of the total revenue of all hotel structures in the country.
Italian Hospitality Market Trends 2023
The management structure of hotels is changing. Traditionally in Italy, owner-managed hotels, including family-owned establishments and hotel groups, predominated. However, there is a noticeable shift as management companies working on a contract basis, known as ‘Management Contracts,’ are increasingly being engaged. This change is primarily attributed to the acquisition of hotel properties by large international investors who are accustomed to this operating model. The main advantages for hotel owners include access to new technologies, industry know-how, international marketing expertise, and association with renowned hotel brands.
How the Image of a 5-Star Hotel Guest Has Changed
The profile of affluent guests in 5-star hotels has changed significantly, with the emergence of Millennial and Gen Z generations, who accounted for 41% in 2019 and are expected to reach 75% by 2026.
In conclusion, it’s worth noting that according to a report from the well-known analytical company Deloitte on the hotel real estate market (Italian Hospitality Market), investments in hotels reached record highs in the first half of 2023. The optimism in the market is fueled by several key factors, including increased tourism, upgraded hotel facilities, and strategic marketing efforts. Notably, 40% of hotels anticipate revenue growth ranging from 3% to an impressive 12%, highlighting the sector’s resilience and potential for investors.
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