International Hotel Markets and Cross-Border Deals

Introduction

The instinct that a hotel is a hotel anywhere in the world is one of the more expensive assumptions a cross-border buyer can make. The building may look identical in Chicago, London, and Osaka, but the single biggest difference between them is invisible from the lobby: it is the legal structure that governs how the operator and the owner share the hotel's economics. In the United States, a branded hotel almost always runs on a management or franchise agreement, with the owner holding the operating risk every night. In much of Europe, the same hotel is leased, with the operator paying the owner rent the way a retail tenant pays a landlord, which makes the European asset behave far more like net-lease real estate than like an American operating hotel. That structural divide, more than any difference in RevPAR or cap rate, is what a banker working across borders has to understand first. The capital is certainly flowing across those borders: European hotel investment reached €22.6 billion in 2025, the highest level since 2019, and in 2024 cross-border buyers supplied 58.6% of volume.

The starting point is how the operator gets paid, because it determines who carries the risk. The US model, built on management and franchise agreements, leaves the owner exposed to the full swing of operating performance while the brand collects a fee. The traditional European model inverts that: the operator signs a lease, pays the owner a contractually fixed rent, and keeps whatever trading profit remains. To an investor, a leased hotel looks like a bond secured on real estate, with predictable income and the operator absorbing the volatility. That is precisely why many European institutional investors have historically preferred or even required leases.

The two models are converging from both directions. International operators have grown reluctant to sign fixed leases, because a lease hands them all the downside in a recession, and investors have increasingly wanted to share in the upside that a pure management contract captures. The compromise is the hybrid lease.

Hybrid (turnover) lease

A European hotel lease that blends a fixed base rent with a variable component tied to the hotel's revenue or profit, so the owner receives a stable floor plus a share of trading upside. Hybrid leases have become increasingly common, sitting between the predictability of a traditional fixed lease and the full operating exposure of a management contract.

For a banker, the practical consequence is that the same physical hotel underwrites completely differently depending on which structure sits behind it. A leased European hotel is valued much like a net-lease asset, off the rent and the operator's covenant strength; an American hotel down the chain scale is valued off a RevPAR-driven operating model. Mistaking one for the other produces a valuation that is wrong before the first assumption is entered.

Europe's 2025 volume, its highest since 2019, was not evenly spread. Two cities sit in a category of their own: London and Paris together accounted for about 15% of total European investment volume, with London overtaking Paris as the most liquid single-asset market at €1.8 billion (up 78%) and Paris reaching €1.6 billion. Spain, anchored by Madrid and a deep leisure-resort market, rounded out the most-wanted destinations. Liquidity in hotels, even more than in other property types, concentrates in a handful of gateway markets where international capital is comfortable.

The buyers driving that volume have been overwhelmingly American. Cross-border investment into European hotels reached €12.9 billion in 2024, up more than 80% year over year, and the five largest US private equity investors, Blackstone, KKR, Baupost, Starwood Capital, and Oaktree, alone contributed roughly €5.9 billion. Private equity cooled in 2025, falling 39% to about €5.2 billion as owner-operators and real estate companies took the lead, but the cross-border thesis held. A strong dollar made euro- and sterling-denominated assets cheaper for US funds, adding a currency tailwind on top of the thesis. This is the cross-border dynamic the EMEA versus US comparison describes playing out in real time, with American capital exploiting both a valuation and a foreign-exchange gap.

Asia Pacific tells a different story again. Regional hotel investment topped $11 billion in 2024 and is projected near $12.8 billion for 2025, and the market is anchored by Japan to a degree no single country anchors Europe. Japan alone accounted for more than $4.5 billion of hotel trades in 2024, drawing capital with its deep liquidity, low borrowing costs, and a tourism boom amplified by a weak yen that made the country cheap for foreign buyers. Landmark deals included the $593 million sale of the Park Front Hotel beside Universal Studios in Osaka, and Mizuho Leasing's $435 million purchase of the Hilton Fukuoka Sea Hawk from Singapore's sovereign wealth fund GIC.

That GIC sale points to the other distinctive feature of APAC hotel capital: the prominence of sovereign wealth funds and large regional allocators, the same institutions profiled in the in-house teams of sovereigns and pensions. Middle Eastern and Asian sovereign funds, alongside an increasingly active base of regional high-net-worth investors, buy hotels directly and at scale, often bypassing public markets entirely. Currency runs through this market as it does in Europe: a quarter or so of APAC deal volume is cross-border, and much of that flow is driven by the same strong-dollar arithmetic that sent US capital into Europe.

Pulling the regions together, a cross-border hotel transaction adds three layers of complexity that a domestic deal never sees, and a banker has to price all of them.

The first layer is currency, which can dominate the return: a hotel that performs exactly to plan in local terms can still deliver a poor dollar return if the local currency weakens before exit, so cross-border underwriting has to separate operating performance from foreign-exchange effects and often hedge the latter. The second is structure, the lease-versus-management divide that changes the entire valuation approach and the diligence checklist. The third is the familiar set of local frictions, the tax regimes, transfer taxes, foreign-ownership rules, and brand availability that vary market by market, the same considerations behind any cross-border M&A. Brand availability is easy to underestimate: the flags that dominate one region are thin in another, with Accor and other European operators far more entrenched across the Continent than in the US, and a buyer who plans to deploy a specific American brand may find the territory already taken or the operator unwilling to expand there. Transfer taxes can be punishing as well, with stamp duties and registration costs in some European and Asian markets running into the high single digits of purchase price, a cost that has to be funded at closing and that quietly erodes the return a US buyer modeled on domestic assumptions.

For a candidate, the international angle is a fast way to show depth, because most interviewees can only discuss the US market. Being able to say that a European hotel is often a leased, net-lease-like asset rather than an operating one, that gateway cities like London and Tokyo concentrate the liquidity, that US private equity has been exporting a strong dollar into European and Japanese hotels, and that currency is a genuine return driver rather than a footnote, signals that you understand hospitality as a global asset class and not just an American one. The building may be the same everywhere; the deal never is.