Holiday properties have evolved from a niche market into a permanent fixture in the real estate sector. This rapidly-growing asset class is proving to be extremely resistant to economic cycles while offering investors the prospect of attractive returns. This is because demand for unique holiday experiences remains high. According to the world tourism organisation, UN Tourism, international tourism has almost returned to pre-pandemic levels in the first seven months of 2024. Tourism is also continuing to see strong growth in Germany. Federal Statistical Office figures show that a record total of 59 million overnight stays were registered in August 2024, up 3.3 percentage points on the previous year. Hotels, guesthouses and B&Bs accounted for 31.1 million (+3.4 percent) of this figure, with holiday rooms and similar accommodation making up 13.3 million (+1.6 percent). These stable figures illustrate the resilience and recovery of this segment.
Holiday properties serve many different needs.
Investors who wish to enter the holiday real estate market must nevertheless carefully consider which locations offer the greatest potential. Not every location works equally well. In addition to the quality of the micro-location, the experience of the operators and innovative usage concepts are crucial. Holiday properties range from secluded resorts and charming boutique hotels to holiday apartments that are tailored to the diverse needs of a heterogeneous target group. This makes the segment very complex and success is not a certainty. A lot of holiday properties have a unique profile that stands out clearly from the mass market and appeals to the needs of discerning travellers. A key factor in success in this area is consequently the ability to respond to the diverse needs of guests and offer a customised concept. This is because the rising demand for individual and sustainable holiday experiences is leading to increasing differentiation in the market. This trend in turn opens up new opportunities for investors.
Individual concepts are in demand.
Compared to city hotels, which often implement standardised concepts, the demands on holiday properties are much higher. Travellers expect authentic experiences that integrate local culture and nature into the holiday experience. As a result, holiday properties often require more space for leisure and adventure activities, comprising several buildings as well as catering, sports and wellness areas.
A successful holiday property project requires comprehensive planning and close cooperation between investors and operators, in order to be able to respond flexibly to guests' wishes and react to changes in the market.
Operating a resort also presents a particular challenge, as different usage areas, various room categories and a high level of staffing need to be considered.
Consolidation and opportunities in the European holiday hotel sector
The holiday hotel industry in Europe is expected to consolidate further in the coming years, although at different speeds depending on the region. Compared to other sectors, the market remains highly fragmented and in many cases is dominated by private operators. Opportunities for investors arise in this environment through succession arrangements. The properties often have value-add potential that could be utilised. For example, outdated properties can be turned into unique offerings in the holiday property market by making specific changes, if general conditions such as the location and the concept are right.
Conclusions
The rising demand for holidays and, in particular, tailor-made travel experiences makes holiday real estate a promising asset class. Investors can benefit from the global trends in tourism by focussing on flexible and future-oriented concepts that bear the changing needs of guests in mind, while also demonstrating ecological and social responsibility. This is because there is a steadily rising number of environmentally conscious travellers. With the right market access, local expertise and experienced operators, holiday properties offer attractive investment opportunities with long-term potential to generate returns.
