While foreign and domestic investment in Italian hotels is on the increase, changes are needed if it is to reach its full potential.
The tourism sector is particularly important in Italy, contributing 13% to the country’s GDP and making Italy the EU country with the highest share of investment in the sector in the Mediterranean area.
In 2018 the Italian hotel market saw domestic and foreign investment of EUR1.3bn – compared to a value EUR650m in 2014 – marking one of the highest levels of investment in the sector to date.
Rome, Milan, Venice, and Florence – long considered world centres of cultural heritage – account for 80% of foreign and domestic investment in the hotel sector, with Rome alone attracting the lion’s share of 40%, followed by the other three cities.
In all, the country boasts 240 major hotel brands, including 143 domestic brands, and is second only to Spain, which has 290 major hotel brands.
However, the market is still particularly fragmented among more than 33,000 hotels, with Italian brands comprising almost two thirds and only a few international groups such as Best Western, Accord Hotel and Marriott International having a strong presence.
Demand for innovative properties
Most in demand in the hotel market are so-called ‘new hospitality’ premises: hostels, serviced apartments and hybrid hotels.
These innovative properties are becoming widespread in Italy and have seen strong growth, thanks to the involvement of international players, and are also encouraging more foreign operators into Italy.
Yet the dominance of so many purely family-run structures also discourages penetration by international hotel chain operators, which make up only 5% of the Italian hotel management market compared to 34% in Spain.
Growing interest in the Italian hotel sector in recent years has seen domestic players increase their investment in its hotel real estate assets, whereas foreign investment has fallen to 53% of the market in 2018 from 70% in 2017.
Summing up, the Italian hotel sector has some weaknesses. Firstly, it lacks cohesiveness and is mostly family run with only low-level penetration by international hotel chain operators. Secondly, despite a recent growth in overall investment, more money still needs to be put into hotel buildings and other sector assets.
But thanks to international interest in Italy’s cultural and artistic heritage, and the country’s relative economic stability, low interest rates and hotel market maturity, the Italian hospitality sector presents some increasingly attractive opportunities for investors going forward.
For more information, contact: