The hospitality industry in Europe is undergoing a transformation, driven by two primary forces: the rise in wellness tourism and the repurposing of mid-market hotels. As consumer preferences shift toward health and wellbeing, and traditional hotel models face evolving market demands, investors and operators are finding new opportunities in these growing sectors. In this TREIO Insight, we will explore the trends shaping the wellness tourism market, the repurposing of mid-market hotels, and the rise of high-efficiency economy accommodations, while also addressing the potential risks investors must navigate.
The Wellness Trend: A Growing Market
The wellness tourism market continues its rapid expansion, projected to reach €1.5 trillion globally by 2030, with a compound annual growth rate (CAGR) of 7.2% (Q3 Insights TREIO). Europe is at the forefront of this movement, driven by increasing consumer demand for health-oriented vacations and experiences. Destinations like Southern Spain, Italy, Portugal, and Austria have emerged as top contenders for wellness investments, particularly in properties focused on eco-conscious and sustainable designs.
Key Insights
- Spain and Italy remain leading destinations for wellness tourism, with a focus on holistic retreats, wellness services, and luxury spa resorts that cater to health-conscious travelers.
- Portugal and Austria are seeing an uptick in investor interest, particularly for projects that integrate wellness with eco-friendly designs. For instance, Portugal has made wellness tourism a strategic priority, while Austria is positioning itself as a hub for holistic health experiences.
- The growing trend of personalised wellness experiences is set to dominate the market. By 2030, it is expected that over 50% of wellness resorts will offer data-driven, personalized wellness journeys, allowing travelers to receive tailored health plans based on individual preferences and needs.
Image: SHA Wellness Clinic, Spain
Case-in-point
The SHA Wellness Clinic in Spain offers an example of how wellness tourism is evolving. The clinic specializes in integrative health programs combining Western medicine, Eastern therapies, and cutting-edge technology, offering guests personalised health plans. This innovative approach has positioned SHA Wellness as a premier destination for travelers seeking customised wellness experiences.
“The future of wellness tourism lies in customization and sustainability. Travellers today seek more than just relaxation—they want a transformative experience that improves their wellbeing long after they return home.”
Repurposing Mid-Market Hotels: Adapting to New Realities
The traditional mid-market hotel sector is facing mounting challenges as consumer preferences shift toward alternative accommodation and wellness-focused properties. As a result, many mid-market hotels are being repurposed into mixed-use developments that offer a combination of co-working spaces, wellness centers, and long-stay apartments. In 2023 alone, approximately €2 billion was invested in refurbishing and repurposing mid-range hotels across Europe.
Key Trends
- Shift in Demand: Standard city center hotels, particularly in oversaturated markets like Paris and Rome, are seeing a decrease in demand. Travelers are increasingly seeking unique, flexible-use spaces that cater to both leisure and business needs.
- Mixed-Use Properties: Investors are transforming traditional hotels into multi-functional spaces that blend accommodation, wellness services, and co-working areas. This trend caters to the growing “bleisure” market—travelers who combine business and leisure.
- Long-Stay Accommodations: There has been a surge in demand for serviced apartments post-pandemic, particularly in cities like Amsterdam and Vienna, where occupancy rates for long-stay properties exceeded 80% in mid-2023
Image: Room Mate Guilia, Milan
Case-in-point
The Room Mate Hotel in Milan is an excellent illustration of a mid-market hotel successfully transitioning into a mixed-use property. Once a traditional mid-range hotel, it has now added co-working spaces and wellness amenities, catering to both business travelers and wellness-focused guests. This shift has resulted in increased occupancy rates and higher guest satisfaction.
These shifts highlight the need for flexibility and innovation within the mid-market hotel sector, as operators seek to remain competitive in a rapidly changing landscape.
The Rise of High-Efficiency Economy Hotels
The high-efficiency economy hotel segment has gained momentum in recent years, with brands like Stay KooooK in Switzerland leading the way by leveraging technology to enhance both guest experiences and operational efficiency. These hotels cater to tech-savvy travelers who value convenience, comfort, and personalised services at an affordable price point.
Investment Trends
- By 2024, over €5 billion is expected to be invested in high-efficiency economy hotels across Europe These investments focus on reducing operational costs through the use of technology, such as contactless check-ins, digital room keys, and smart room controls.
- Competitors such as Bob W., Zoku, and Staze are also innovating in this space, offering tech-driven hospitality solutions that appeal to travelers seeking flexible, self-sufficient living environments. These hotels provide investors with a lucrative opportunity, as they typically require lower operating costs while still delivering high guest satisfaction. For example, Stay KooooK reported an average occupancy rate of 80% in 2023, with 15% year-over-year growth in revenue per available room (RevPAR)(Q3 Insights TREIO).
“Repurposing mid-market hotels into mixed-use spaces not only maximises the value of the underperforming assets but also aligns with shifting consumer preferences for flexible, wellness-oriented environments.”
Andrew Sangster, Founder and Editorial Director, Hotel Analyst
Projections and Challenges
While the European hospitality sector is poised for continued growth, several challenges must be addressed to ensure sustained investment:
- Sustained Investment: Investment volumes are projected to average €35 billion annually through 2030, driven largely by wellness-focused properties and high-efficiency hotel models.
- Economic and Geopolitical Risks: Inflationary pressures, labor shortages, and geopolitical tensions across Europe, the US, and the UK could impact both consumer spending and investor confidence. Additionally, the rise in operational costs due to inflation may put pressure on profitability, particularly for mid-market hotels that are more vulnerable to these fluctuations.
- ESG Compliance: The challenge of retrofitting older properties to meet environmental, social, and governance (ESG) standards remains a significant hurdle. Investors are increasingly looking to green financing and governmental tax incentives to offset the costs of making their properties more sustainable.
Downside: Risks to Growth
Despite the positive outlook, the European hospitality and wellness sectors face several risks that could impact growth. Rising operational costs, driven by inflation and ongoing labor shortages, are squeezing profitability, particularly for mid-market and high-efficiency hotels. Additionally, the sector’s reliance on sustainability investments poses challenges, as retrofitting older properties to meet ESG standards can be prohibitively expensive, especially for smaller operators.
In 2023, only 40% of hotel investments met ESG criteria, underscoring the difficulty in achieving sustainability goals. Furthermore, geopolitical instability and regulatory changes—such as stricter environmental standards or tax policies—could further disrupt market stability and investor confidence. Lastly, the increasing reliance on technology to enhance guest experiences may alienate less tech-savvy travelers, potentially impacting occupancy rates in certain segments.
Image: Stay Kooook, Bern
Conclusion
The European hospitality sector is undergoing a dynamic transformation, driven by the rising demand for wellness tourism and the repurposing of mid-market hotels. While challenges such as inflation, labor s, and ESG compliance must be navigated, the overall outlook remains positive. Investors who capitalise on these trends—by focusing on adaptable, tech-driven, and wellness-centered properties—are well-positioned to succeed in this evolving market.
Sources and references
Global Wellness Institute, 2023, Savills European Hotels Report, 2023, STR Global, 2023, CBRE, 2024, HotStats, 2024, Q3 TREIO Insights
About TREIO
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As specialists in property advisory and asset optimisation strategies, we carefully source and manage assets across several classes including residential, office, logistics, leisure & hospitality, healthcare, wellbeing, alternatives, and mixed-use developments.
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