As a result, mega hospitality brands such as Marriott, Hilton, and Accor have leveraged cross-border investment to develop luxury and budget accommodations in emerging economies and urban centres and the free flow of capital has facilitated large-scale projects and infrastructure development, strengthening the hospitality sector.

However, the recent shift towards deglobalisation, influenced by political conflict, protectionism, economic challenges, and social factors, has meant that the hospitality sector is facing the prospect of a shifting landscape in 2025, not least a greater influence from more local consumers.

A post-pandemic domestic tourism boost was evident from the UK to China, with travel and visa limitations hindering cross-border travel. The UK hospitality sector saw a huge boom directly after the lockdowns but then suffered from revenge travel among UK residents which took people abroad again. In 2025, while international travel is firmly back on the consumer agenda, domestic holidays are also on the rise, according to RSM Consulting.
In the UK, for example, the staycation market is set for growth, with 28 per cent of consumers planning long-stay British holidays in 2025 and short domestic getaways also holding steady, with 33 per cent of respondents planning a weekend trip within the UK this year.

The RSM Hotels Tracker highlighted a trend of consumers trading up in their choice of accommodation in 2024, with demand for luxury and mid-market hotels on the rise, while budget hotels experienced a decline. The occupancy rates for luxury and mid-market hotels increased year-on-year, reaching 76 per cent (up from 73 per cent) and 82 per cent (up from 80 per cent), respectively. In contrast, budget hotels saw occupancy drop from 83 per cent to 80 per cent.

Optimising hotels for locals

Many US travellers, so predominant in Europe last year, are also looking to stay closer to home and one possible response from hotels is to embed themselves deeper in their communities to provide services and spaces for locals – as some urban hotels have pivoted – or access to their services through platforms such as ResortPass, says New York-based CEO Michael Wolf. His company provides day passes to hotels, providing hotels with additional income away from their overnight guests.

“Typically as a local we all pass hotels everyday but we have no interaction with them, as compared with overnight guests, 97 per cent of whom will only ever visit once,” says Wolf. “Opening up a hotel to local day visitors provides incremental income and arguably gross margin. Hotels have become such experts at maximising income around room product, so the logic is to extend it to the rest of the hotels facilities, especially given that a day visitor typically spends, for example two to three times as much on F&B. There’s a real opportunity to focus on ancillary revenue and give the local community a great guest experience.”

He says that the opportunity for this income spans a wide range of hotel types – whether it be a resort, a 5* luxury or 4* family-style hotel – with guests typically using the pool, fitness and wellness facilities. The key, he stresses, is to use excess capacity, so that the day guests don’t impact the overnight guests by competing for facilities.

“This is incremental to travel, a lot of people are looking at a chance of escapism, and prioritising short trips without the hassle of travel, visas and so on, so it plays into this idea of treating yourself without any hassle,” Wolf adds.

European travel trends

The just-published European Tourism Trends & Prospects Q4 2024 has also identified changing travel behaviour performance in European tourism during the autumn and winter, with consumers increasingly opting for value-for-money destinations. The latest estimate suggests that in 2024, tourists spent 7.8 per cent more across Europe than in 2023, equating to €705 billion, with almost three-quarters of total regional spend driven by Western Europe.

By contrast, the recovery of long-haul travel is still lagging, 5 per cent below 2019 levels largely due to the slow recovery from the Asia Pacific region, particularly China. Travel demand from this market has been mainly focused on regional trips, with fewer long-haul journeys, especially to Europe. On average, arrivals from China to European destinations are 39.6 per cent below pre-pandemic levels.

US transatlantic travel helped sustain momentum during Europe’s post-pandemic recovery but there is more uncertainty under the Trump administration as inflation risks could shrink disposable income, potentially reducing international travel.

“European tourism will continue to navigate an increasingly complex landscape and heightened geopolitical and economic uncertainty,” says ETC President Miguel Sanz. “Despite challenges such as rising travel costs and shifting consumer preferences, Europe’s tourism sector has shown remarkable resilience. At the same time, we are witnessing positive trends, such as a growing focus on off-season travel, which helps distribute tourism demand more evenly throughout the year.”

Cross-border investment

Perhaps no surprise then that investment sources are also expected to come from closer to home this year. Deloitte’s survey of European intentions for 2025 showed that more than half of respondents (59 per cent) expect finance for hotel investment to be sourced from Europe, closely followed by the US (41 per cent) and the Middle East and North Africa (36 per cent). Only 4 per cent of respondents saw China as a major source of investment, while just 3 per cent expected significant capital flows from India.

“Traditional debt financing is regaining prominence in the European hotel market, with 54 per cent of respondents expecting it to be the most common source of financing in 2025,” says Deloitte Partner Fleurine Mijinke. “Private equity remains the main source of equity finance for European hotel acquisitions, with 36 per cent of respondents expecting it to be the largest source of equity capital in 2025. However, financing from both sovereign wealth funds and hotel funds are expected to lose momentum in the coming year, reflecting a potential shift in investment strategies.”
Similarly, while Lisbon, London, Madrid, and Zurich as among the most appealing targets for US and Asian investors, according to JLL, European investors are drawing their sights back home and expect to be primarily focused on domestic investments.

“Key urban centres are likely to be the main beneficiaries of this investment impetus, and the sector in European cities could be set for a significant period of volume growth as we look ahead,” says Will Duffey, Head of EMEA Hotels at JLL, with Europe’s strong fundamentals attracting an increase in continental cross-border activity last year.

After years of globalisation, while clearly international travel and investment remain hugely important, the hospitality business could see a sharper focus on national and regional customers in 2025. As ever, the key will be adaptation.

By Mark Faithfull