The half-year results of Europe’s leading listed hotel investor reveal an increasingly selective market: Italy and Spain are driving growth, capital expenditure is generating higher returns than acquisitions, and rental income is gaining weight relative to direct operating exposure
Covivio Hotels’ H1 2026 results do more than report the performance of one of Europe’s largest hotel property owners.
They reveal how institutional capital is reassessing hospitality assets.
The figures point to five clear trends:
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Italy is the strongest-performing hotel market in Covivio’s portfolio;
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the Milan portfolio acquired in 2026 establishes an indicative benchmark of approximately €241,000 per key;
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Covivio is increasing the weight of rental income relative to the operating risk associated with directly managed hotels;
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the marginal return on capital expenditure is significantly higher than the return on new acquisitions;
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the current 1.99% average cost of debt remains a temporary advantage that future refinancing will inevitably erode.
The most important conclusion, however, does not concern the six months just reported.
It concerns what could happen in the Italian hotel market over the next few years.
Only 7% of Covivio Hotels’ portfolio is currently allocated to Italy, despite the country recording the strongest RevPAR growth and property valuation increases across the group’s entire portfolio.
This imbalance could be corrected through further acquisitions.
Institutional capital will not, however, be looking generically for “Italian hotels”. It will seek structured properties, transparent contracts, reliable operators and cash flows that meet institutional investment criteria.
The conclusions before the numbers
1. Italy is the portfolio’s strongest-performing market
At the end of May 2026, Italian RevPAR was up 13.1%, compared with:
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6.3% in Spain;
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approximately 2.5% in France and the United Kingdom;
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a 1.4% decline in Germany.
The value of Covivio’s Italian hotel properties also increased by 3.2% on a like-for-like basis during the first six months of the year, the strongest performance across its entire hotel portfolio.
Institutional capital is therefore looking at an Italian market in which operating performance and real estate values are improving simultaneously.
2. Milan establishes an indicative benchmark of approximately €241,000 per key
The four-star hotel portfolio acquired from Invest Hospitality was valued at €217 million and includes approximately 900 rooms.
This produces an indicative average value of:
approximately €241,000 per key.
This is not a universal valuation benchmark for every hotel room in Milan.
It applies to a portfolio that is:
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recently refurbished;
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located in prime districts;
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compliant with high ESG standards;
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leased for approximately 20 years;
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operated by an established hotel company;
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transferred through a sale-and-leaseback transaction.
It is therefore a highly relevant benchmark, but only when interpreted within the correct investment context.
3. Covivio is selectively reducing operating risk
Annualised revenue from leased hotels increased by 8.4% to €241.3 million.
Revenue from hotels held under the murs et fonds model, where both the real estate and operating business are owned, declined by 13.1% to €129.8 million.
Part of this reduction reflects changes in the portfolio perimeter rather than a broad deterioration in operating performance.
Nevertheless, the reclassification of a French property from an owner-operated asset to a leased hotel confirms a broader trend: Covivio is assigning greater weight to contractual income and reducing its exposure to direct hotel operating risk.
This is not yet an exit from the murs et fonds model.
It is a gradual rebalancing towards more predictable and institutionally transparent cash flows.
4. Capital expenditure is delivering higher returns than acquisitions
The eight new repositioning programmes launched during the period require €109 million of investment and have an average target marginal return of 12%.
The average yield across the hotel portfolio is 6.2%.
The Milner York extension is targeting a return on investment of as much as 18.5%.
The message for Italian hotel owners is clear:
at this stage of the cycle, well-structured capital expenditure can create more value than a new acquisition.
This is true, however, only when the property owner is contractually able to capture the additional EBITDA generated by the investment.
5. A 1.99% cost of debt will not last indefinitely
Covivio benefits from a financial structure established largely before, or during the early stages of, the interest-rate tightening cycle.
Its average cost of debt has fallen to 1.99%, but the group faces €888 million of financing maturities in 2029.
Repricing has not been eliminated.
It has been postponed.
The European hotel market outlook
According to Covivio, European hotel RevPAR was up 2.2% at the end of May 2026.
Growth was driven primarily by ADR, while occupancy improved only marginally.
This is the typical dynamic of a mature market: following the post-pandemic recovery, room volumes have less scope for expansion and future growth increasingly depends on:
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product quality;
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market positioning;
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pricing power;
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demand mix;
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asset repositioning.
Growth varies significantly between markets.
| Market | RevPAR growth at the end of May 2026 |
|---|---|
| Italy | +13.1% |
| Spain | +6.3% |
| France | approximately +2.5% |
| United Kingdom | approximately +2.5% |
| Germany | -1.4% |
European hotel transaction volumes reached €4.8 billion during the first quarter of 2026.
Hospitality continued to represent approximately 11% of total real estate investment volumes.
The market is not expanding indiscriminately.
It is becoming more selective.
Investors are prioritising:
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prime assets;
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liquid destinations;
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already repositioned properties;
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financially sound tenants;
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long-term contracts;
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predictable income;
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ESG compliance.
Secondary properties remain considerably less liquid.
This distinction is particularly important for the Italian market.
A secondary hotel is not simply an asset worth less money.
It may be an asset for which no institutional buyer can be found, regardless of the asking price.
Milan: the transaction defining the benchmark
In April 2026, Covivio Hotels announced the acquisition of a portfolio comprising four recently refurbished four-star hotels in Milan.
The properties include approximately 900 rooms and are located in prime areas of the city.
The transaction was structured as a sale and leaseback with Invest Hospitality, which sold the properties while retaining hotel operations under long-term leases combining fixed and variable rent.
| Item | Figure |
|---|---|
| Total transaction value | €217 million |
| Rooms | approximately 900 |
| Indicative average value per key | approximately €241,000 |
| Target yield | approximately 7% |
| Estimated implied annual rent | approximately €15.2 million |
| Indicative annual rent per key | approximately €16,900 |
| Average lease duration | approximately 20 years |
| Completion | three hotels in Q2 2026, fourth expected in Q1 2027 |
The implied annual rent of €15.2 million is our own estimate, calculated by applying the stated 7% target yield to the total transaction value.
It is not a figure directly disclosed by Covivio.
Why the 7% yield must be interpreted carefully
A target yield of approximately 7% for prime Milan hotels may appear high compared with the market narrative surrounding cap-rate compression.
The leases, however, include both fixed and variable rent.
The variable component exposes the property owner to hotel performance and therefore requires a risk premium.
A 7% yield on mixed rent cannot be compared directly with a 5.5% yield on fully fixed and guaranteed rental income.
Anyone assessing the sale of a hotel today must distinguish between:
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the real estate yield;
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the fixed component of rent;
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the variable component;
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the tenant’s financial strength;
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the remaining lease term;
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future capital expenditure;
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the operating risk retained by the owner.
These factors are also central to the analysis of hotel valuations and extraordinary hospitality transactions.
The value per key applies to an already institutionalised product
The €241,000 per key figure represents the average value of properties that have already been refurbished and meet high environmental standards.
It cannot automatically be applied to a hotel affected by:
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deferred capital expenditure;
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outdated guestrooms;
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inefficient building systems;
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ongoing disputes;
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planning irregularities;
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unnormalised financial results;
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unclear contracts;
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excessive dependence on the owner.
The valuation gap between an institutionally investable hotel and one requiring substantial repositioning is not marginal.
It can amount to tens of thousands of euros per key.
Invest Hospitality monetises the real estate without giving up operations
The most significant feature of the transaction is the separation between real estate ownership and hotel operations.
Invest Hospitality releases €217 million of capital tied up in property while retaining hotel operations under 20-year leases.
This is a clear OpCo–PropCo structure:
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the PropCo owns the properties and receives rental income;
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the OpCo operates the hotels and assumes the operating risk;
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the released capital can be reinvested in the expansion of the operating platform.
For asset-rich but liquidity-constrained Italian hotel groups, sale and leaseback may represent one of the most effective routes to growth.
It is not, however, simply a real estate disposal.
It requires:
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sustainable rent levels;
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balanced lease agreements;
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clear allocation of future capital expenditure;
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guarantees proportionate to the risk;
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adequate operator capitalisation;
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the ability to generate GOP and cash flow over the long term.
The structuring of transactions of this kind is one of the core areas covered by Investhotel, with particular attention to the distinction between real estate value, business value and the long-term sustainability of the lease.
The comparison with Torremolinos
In May 2026, Covivio acquired the 440-room Tent Torremolinos on the Costa del Sol for €43.5 million.
The hotel is leased to FERGUS Group for 20 years, with a minimum guaranteed yield of 7.1% and a target yield above 8% when the variable component is included.
|
|
Milan | Torremolinos |
|---|---|---|
| Rooms | approximately 900 | 440 |
| Investment | €217 million | €43.5 million |
| Value per key | approximately €241,000 | approximately €99,000 |
| Yield | approximately 7% target | 7.1% minimum, above 8% target |
| Rent structure | fixed and variable | fixed, with target variable component |
| Duration | approximately 20 years | 20 years |
The comparison reveals two different investment strategies.
Milan provides:
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capital-value protection;
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urban liquidity;
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corporate and leisure demand;
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greater preservation of invested capital.
Torremolinos provides:
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a lower cost per key;
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a higher yield;
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high-volume leisure demand;
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a stronger contribution to portfolio cash flow.
The two assets are not substitutes.
They balance each other within a diversified portfolio.
The less visible figure: rebalancing away from murs et fonds
Covivio Hotels controls 278 hotels comprising 39,452 rooms.
At 30 June 2026, annualised revenue attributable to the group was divided as follows:
| Segment | Hotels | Rooms | Annualised revenue | Change | Share |
|---|---|---|---|---|---|
| Leased hotels | 226 | 30,774 | €241.3 million | +8.4% | 65% |
| Murs et fonds hotels | 52 | 8,678 | €129.8 million | -13.1% | 35% |
| Total | 278 | 39,452 | €371.1 million | -0.2% | 100% |
The income statement for directly operated hotels shows:
| Group-share figure | H1 2025 | H1 2026 | Change |
|---|---|---|---|
| Total revenue | €219.8 million | €209.1 million | -€10.7 million |
| Room revenue | 159.4 | 153.1 | -6.3 |
| Food and beverage revenue | 42.8 | 39.3 | -3.5 |
| GOP | 73.7 | 70.8 | -2.9 |
| GOP margin | 33.5% | 33.9% | +0.4 percentage points |
| EBITDAR | 55.1 | 53.0 | -2.1 |
| EBITDA | 54.7 | 52.5 | -2.1 |
| Net result | -6.9 | -4.0 | +2.9 |
These figures must be interpreted carefully.
Part of the decline resulted from the disposal of a German hotel and a change in the operating model of a French property.
On a like-for-like basis, Covivio reported EBITDA growth of 2.2%.
The GOP margin improved by 40 basis points, while staff costs declined from €75.4 million to €71.8 million.
There is therefore no evidence of a structural deterioration in hotel operations.
There is, however, a capital-allocation issue.
Despite generating €52.5 million of EBITDA, the segment reported a net loss of €4 million, primarily after accounting for:
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depreciation;
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financing costs;
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the cost of the capital committed to the real estate;
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the investment required to keep the properties competitive.
The correct conclusion is not that direct hotel operation is an ineffective model.
It is that operating EBITDA alone is insufficient to measure the total return generated by hotel capital.
An owner who values a hotel solely by reference to EBITDA, without considering depreciation, normalised capital expenditure and the required return on the real estate, is looking at only part of the economic result.
The correct question is:
does the hotel operation genuinely remunerate the real estate capital employed, or is it merely converting property wealth into revenue?
The answer determines the choice between:
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direct operation;
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business lease;
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property lease;
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hotel management agreement;
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sale and leaseback;
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outright disposal.
For owners that wish to retain hotel operations while separating them from the real estate, Necci Hotels develops operating and management models focused on the hotel’s long-term financial sustainability, clearly distinguishing the return generated by the OpCo from that generated by the PropCo.
Repositioning is the real driver of returns
Covivio has identified 20 hotels within its portfolio with repositioning potential.
| Indicator | Total value | Group share |
|---|---|---|
| Asset value | approximately €860 million | €641 million |
| Planned investment | approximately €400 million | €284 million |
| Expected value creation | approximately €260 million | €170 million |
| Initial EBITDA | €51 million | €39 million |
| Target EBITDA | more than €103 million | €75 million |
Eight new projects were launched during the first half of 2026:
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€109 million of investment;
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€50 million of expected value creation;
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€13 million of incremental EBITDA;
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an average target return of 12%.
The projects include:
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Novotel Lille Flandres;
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Ibis Pantin Église;
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Mercure Saxe Lafayette in Lyon;
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Ibis Toulouse Centre;
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Ibis Styles Lille Centre;
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Milner York;
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Mercure Paris Parc des Princes;
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Novotel Gent Centre.
The Milner York extension, which will add 44 rooms and new meeting facilities, has a target return on investment of 18.5%.
The Mercure Nice Promenade des Anglais, reopened following its repositioning and now operated by WiZiU, has reportedly already generated more than €22 million of value creation.
A further seven hotels are scheduled for the 2026–2029 period, involving:
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€218 million of investment;
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€116 million of expected value creation;
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a marginal return of 13%.
The comparison is clear:
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average portfolio yield: 6.2%;
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return on capital expenditure: 12% to 18.5%.
Repositioning can therefore generate returns two or three times higher than simply holding the property.
There is, however, one essential condition.
When an owner finances capital expenditure on a hotel subject to a fixed-rent lease without renegotiating the contract, the increase in EBITDA may accrue entirely to the operator.
Before construction begins, the parties must define:
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the revised rent;
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the variable-rent component;
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key money;
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the duration of the agreement;
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responsibility for capital expenditure;
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capital-recovery mechanisms;
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performance tests;
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guarantees.
Hotel Management Group works at the intersection of investment, operations, marketing, governance and financial control, supporting owners and investors in the development of sustainable value-enhancement plans.
Consolidated results
Income statement
| Indicator | H1 2025 | H1 2026 | Change |
|---|---|---|---|
| Total revenue | €163.4 million | €168.8 million | +3.3% |
| Fixed rent | 91.5 | 97.3 | +6.3% |
| Variable rent | 71.4 | 71.0 | -0.4% |
| Operating result | 157.1 | 179.4 | +14.2% |
| Group-share net income | 114.5 | 143.1 | +25.0% |
| EPRA earnings | 132.3 | 132.7 | +0.3% |
| EPRA earnings per share | €0.88 | €0.84 | -4.3% |
Net income increased by 25%, supported by €58.9 million of positive property fair-value movements.
EPRA earnings, which more closely reflect recurring profitability, remained broadly stable.
Earnings per share declined by 4.3%, partly because of dilution arising from the scrip dividend paid in 2025.
Portfolio value
The hotel portfolio was valued at €6.259 billion on a group-share basis, an increase of 1% like for like.
| Segment | Value at 31 December 2025 | Value at 30 June 2026 | LFL change | Yield |
|---|---|---|---|---|
| Leased hotels | €3.719 billion | €3.958 billion | +1.1% | 6.1% |
| Murs et fonds | €2.255 billion | €2.302 billion | +0.9% | 6.3% |
| Total | €5.974 billion | €6.259 billion | +1.0% | 6.2% |
Value growth was concentrated in southern Europe:
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Italy: +3.2%;
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Spain: +2.8%;
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Nice: +2.8%.
The average yield remained stable at 6.2%.
The increase in value was therefore driven primarily by rental and operating growth rather than cap-rate compression.
Geographic composition
| Market | Share of portfolio |
|---|---|
| France | 33% |
| Germany | 20% |
| United Kingdom | 13% |
| Spain | 12% |
| Belgium | 7% |
| Italy | 7% |
| Other markets | 8% |
Germany accounts for 20% of the portfolio despite recording a 1.4% decline in RevPAR.
Italy represents only 7%, despite delivering the strongest growth.
The reallocation towards southern Europe therefore appears to be a structural portfolio correction rather than a short-term tactical decision.
Financial structure: sound, but 2029 must be monitored
| Indicator | 31 December 2025 | 30 June 2026 |
|---|---|---|
| Net debt | €1.850 billion | €2.175 billion |
| LTV | 28.4% | 32.0% |
| Average cost of debt | 2.20% | 1.99% |
| Average debt maturity | 4.9 years | 4.6 years |
| Interest-rate hedging | 103.6% | 105.6% |
| ICR | — | 8.28x |
| Net debt to EBITDA | — | 7.2x |
| S&P rating | BBB+ stable | BBB+ stable |
LTV increased by 3.6 percentage points as a result of:
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the dividend distribution;
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new acquisitions;
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higher net debt.
The financial structure remains well within its covenant limits.
The most restrictive LTV covenant is 60%, compared with an effective banking LTV of 33.9%.
The portfolio could therefore sustain a significant decline in value before approaching the contractual threshold.
The principal issue to monitor is 2029, when €888 million of financing will mature.
The current average debt cost of 1.99% reflects bonds and hedging instruments negotiated under substantially more favourable conditions than those available today.
Refinancing could materially increase the group’s average cost of capital.
The sensitivity of value to cap rates
Covivio publishes a particularly useful simulation showing the effect of yield movements on the value of its leased hotel portfolio.
| Yield | Portfolio value | Change |
|---|---|---|
| 5.1% | €4.735 billion | +19.6% |
| 5.6% | €4.312 billion | +8.9% |
| 6.1% | €3.958 billion | — |
| 6.6% | €3.658 billion | -11.0% |
| 7.1% | €3.400 billion | -14.1% |
An increase of only 50 basis points in the yield reduces the portfolio’s value by approximately 11%.
Under a combined scenario involving:
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a 100-basis-point increase in cap rates;
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a 10% decline in rental income;
the value would fall by 22.7%.
The quality of the tenant, the duration of the lease and the stability of the rent are therefore not peripheral contractual details.
They are direct components of the property’s value.
What this means for the Italian hotel market
For hotel owners
Italy currently offers one of Europe’s strongest combinations of operating performance and institutional investment appetite.
Institutional investors, however, do not acquire only an attractive location or a hotel with high revenue.
They acquire assets they can understand and underwrite.
This requires:
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clear title;
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planning and building compliance;
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normalised financial statements;
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quantified capital expenditure;
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sustainable contracts;
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ESG compliance;
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professional governance;
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a management structure that does not depend entirely on the owner.
An asset lacking these qualities is not simply valued at a discount.
It may be excluded from the acquisition process altogether.
For owner-operators
Operating EBITDA is not the same as the return on the real estate investment.
The analysis must separate:
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operating performance;
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property return;
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cost of debt;
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depreciation;
-
normalised capital expenditure;
-
required return on equity.
Only after this separation is it possible to determine whether the most appropriate strategy is to:
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continue operating directly;
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appoint a third-party operator;
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lease the property;
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sell only the operating business;
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complete a sale and leaseback;
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dispose of the entire asset.
For investors deploying capital
Covivio’s reported repositioning returns of between 12% and 18.5% are significantly higher than the portfolio’s average yield.
Capital expenditure creates value, however, only when it:
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increases ADR;
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improves RevPAR;
-
grows GOP;
-
reduces energy and maintenance costs;
-
supports a higher rent;
-
is reflected in the property valuation.
Without an appropriate contractual mechanism, the owner risks financing the operator’s additional margin.
For sellers
The approximately 7% target yield on mixed rent provides a current and credible market parameter.
It cannot be compared with expectations based on:
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5% cap rates applied to variable rental income;
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multiples of unnormalised operating EBITDA;
-
per-key values derived from fully refurbished hotels;
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transactions with materially different contractual conditions.
Institutional valuations begin with sustainable income and contractual risk, not the owner’s subjective price expectations.
Our view
Covivio Hotels’ half-year results describe a two-speed European market.
On one side are prime properties, robust contracts, liquid locations and operators capable of attracting institutional capital.
On the other are secondary assets, opaque operating structures and ownership models that do not support institutional underwriting.
Italy is winning in terms of operating performance, but it has not yet fully monetised that advantage through property values.
Only 7% of Covivio’s portfolio is invested in the country delivering the strongest RevPAR and valuation growth.
It is difficult to believe that this allocation will remain unchanged.
The capital will arrive.
The real question is what it will find.
It may find:
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a hotel ready to be incorporated into a wider portfolio;
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a business that can operate independently of its owner;
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clear contracts;
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a defined investment plan;
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reliable reporting;
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an asset compatible with an OpCo–PropCo structure.
Alternatively, it may find a collection of risks requiring a discount:
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corporate uncertainty;
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deferred capital expenditure;
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dependence on the owner;
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unnormalised financial information;
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unbalanced contracts;
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technical or planning irregularities;
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informal governance.
The difference between these two conditions can amount to tens of millions of euros.
And it must be built before the sale process begins, not during negotiations.
Are you considering the sale, acquisition or restructuring of a hotel?
InvestimentiAlberghieri.it, together with the specialist expertise of Investhotel and Hotel Management Group, supports hotel owners, investors and operators in the analysis and structuring of:
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hotel acquisitions and disposals;
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sale-and-leaseback transactions;
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business leases;
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hotel management agreements;
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valuations;
-
business plans;
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repositioning programmes;
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OpCo–PropCo separations;
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operator selection;
-
value-enhancement strategies.
To submit a transaction or request a confidential discussion, contact info@investimentialberghieri.it.
Source: Covivio Hotels, 2026 half-year financial report. Per-key values, implied rents and any other figures identified as estimates have been calculated from the information published by the group.
