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Tourism breaks records, scarcity in hotels: opportunities for investors in hotel real estate

February 7, 2025 10 Minute Read

By Sam Elders

A hand holding a key card against an electronic door lock.

Tourism in the Netherlands continues to grow

After the record number of tourist overnight stays[1] in the Netherlands in 2023, the record has been improved in 2024. From January to November, the number of tourist overnight stays in the Netherlands increased by more than 4% compared to 2023. The number of overnight stays by domestic tourists grew by 5%, while the number of overnight stays by foreign tourists increased by more than 3%. In Amsterdam, the number of foreign tourist overnight stays in particular has increased again (+5%), making the city the most visited destination in Europe after London, Paris and Barcelona.

The origin of the tourists is also changing. Climate change and rising temperatures are increasingly affecting tourism in the Mediterranean region, causing more and more people to flee these regions in the summer and travel to the Netherlands, for example. The number of tourists from Eastern Europe is increasing sharply due to growing purchasing power, and the number of overnight stays by North American tourists is rising thanks to the favorable exchange rate of the Dollar against the Euro and the recovery of business travel, conferences and trade fairs.

Positive developments on overnight stays

Domestic tourists and domestic business travellers;
Visitors from the Mediterranean region;
Tourists from Eastern Europe;
Visitors from the U.S. and Canada.

Negative developments on overnight stays

Tourism from United Kingdom;
Luxury tourism from Russia and China;
Tourism from Israel.


At the same time, the discouragement policy of the municipality of Amsterdam seems to have an effect on the number of tourists from Great Britain and political unrest is causing a decrease in tourists from Russia, China and Israel, which negatively affects luxury tourism in Amsterdam in particular. Chinese tourists are expected to gradually return to the Netherlands, although a full recovery to pre-pandemic levels before the second half of 2025 is unlikely.

Overall, the balance sheet is strongly positive, with an expected increase of 1.5% to 2% in spending on hotels and restaurants in 2025 and 2026, adjusted for inflation. While the Netherlands will lag slightly in the growth of inbound overnight stays at the European level in 2024, this growth is expected to accelerate in the coming years, partly due to a resurgence in business travel. With strong demand and a bright outlook, the hotel sector in the Netherlands will benefit from this.

Biggest cost increases behind us, operation will improve in 2025

The surge in tourism in the Netherlands in 2023 offered hotels the opportunity to pass on both fixed and variable costs in room rates. In 2024, however, this stretch will clearly be exhausted; The average room rate fell by almost 2%, despite a slight increase in the average occupancy rate, which rose from 71.6% to 72.6%. This means that the Dutch hotel sector is performing relatively well in a European context, where the average occupancy rate in 2024 will be 68.7%.

Still, revenue per available room (RevPAR[2]) decreased by 0.4% in 2024. This was mainly due to the significant 11% increase in wage costs in the hospitality sector in 2024, largely resulting from a scarcity of staff. By comparison, wage growth in other sectors averages around 6%. In addition, the risk of higher energy costs remains a concern for hotel operators, considering the substantial impact of high energy consumption. This made 2024 a year in which effective cost management was crucial for the hotel industry.

For 2025, the biggest cost increases seem to be behind us, with falling inflation rates and ‘normal’ wage increases on the horizon. Prospects of a further increase in occupancy and the expectation of rising room rates are expected to improve operation in 2025.

Tax increases and room rates: uncertain factor for operation

The government's plan to raise the VAT on hotel stays from 9% to 21%, potentially taking effect in January 2026[3], introduces some uncertainty regarding the revenue growth of Dutch hotels in the medium term. It is unclear whether operators will be able to fully pass on this increase to their guests, given the price sensitivity of hotels. Research by the FD[4] shows that this increase could make hotels up to 11% more expensive, which could undermine the recovery of the hotel sector after the pandemic. From an international perspective, the proposed regulation does indeed mean a high tax burden for Dutch hotels.

For hotels in Amsterdam, there will be an extra increase in the tourist tax. At the beginning of 2024, this tax was increased from 7% plus € 3 per person to 12.5% of the room rate. In combination with the increased VAT rate, this could lead to a total tax burden of nearly 35% by 2026, putting the competitive position of Amsterdam hotels under pressure compared to other European cities. The impact of the increase in the municipal tourist tax on room prices is evident from the 3% decline observed in Amsterdam between 2023 and 2024. As a result, Amsterdam, along with Dublin, Geneva, and Copenhagen, is among the few major tourist cities in Europe where room prices have decreased.

Strict hotel policy is a breeding ground for rising room rates

The pipeline for the Dutch hotel market through 2028 anticipates a 2.5% growth in the total number of available rooms, resulting in a net increase of 1,250 rooms, bringing the total to nearly 49,600. This means that the Netherlands has the lowest growth in new hotel supply in Europe. This limited growth will allow existing hotels in the Netherlands to benefit in the medium term, as expected demand significantly outpaces supply growth.

Several Dutch municipalities have a restrictive hotel policy, with Amsterdam as the most prominent example. The municipality does not cooperate with hotel initiatives that do not fit within the applicable spatial plan. New hotels can only be built if an existing hotel closes, provided that there is a qualitative improvement and the overnight capacity remains the same. This policy has a significant impact on the pipeline for Amsterdam, where the number of hotel rooms will only increase by 0.8% through 2027. After this period, municipal policy will hinder further expansion of capacity.

Other municipalities, such as Utrecht, Haarlemmermeer, Breda and Maastricht, also strictly regulate hotel developments. The Municipality of The Hague has even imposed a hotel stop until the occupancy in the municipality is above 70% for two years. Rotterdam, Leiden and Eindhoven are more flexible and allow new hotel developments, but with the restriction that this is only allowed in specific locations within these cities.

A figure showing the development of room rates and occupancy rates 2023-2024 in Dutch cities 

The impact of new hotel developments on occupancy is clearly visible in cities such as Leiden, where an IntercityHotel with 115 rooms will be completed in 2024 and in Breda, where the Leonardo Hotel has been renovated and an IntercityHotel also has been opened. In other cities, the occupancy rate increased. In Amsterdam, Rotterdam, Schiphol and The Hague, however, we saw decreasing room prices. In Amsterdam, the increase in tourist tax was a major factor, leading to price reductions to compensate for this increase. In Rotterdam, the expansion of hotel inventory and increased competition contributed to the decline in room rates, while in The Hague and Schiphol, the decrease in business overnight stays, which are not yet at pre-covid levels, has forced hotels to reduce prices to improve occupancy. At the same time, both room rates and occupancy rates increased in Utrecht, Eindhoven and Maastricht, which means that hotels in these cities have performed relatively well in 2024.

Due to the expected growth in tourism, the restrictive policy is expected to have an upward effect on room rates, especially in Amsterdam, The Hague, Maastricht and Utrecht, where the supply is hardly increasing.

The hotel investment market is starting to show momentum again

The continued growth of tourism in the Netherlands is leading to an increasing interest from investors in hotel real estate. In 2024, more than € 420 million was invested in hotels, which represents an increase of more than 65% compared to the € 250 million in 2023. The largest transaction was the sale of Hotels van Oranje in Noordwijk for € 65 million.

It is remarkable that mainly opportunistic investors, such as private investors and private equity, are active in the hotel investment market. These parties often focus on value-add products, with office conversions also gaining increasing interest. A good example of this is the purchase of Boompjes 200 by the Van der Valk Exclusive Group in Rotterdam. This old office building is being converted into a hotel with about 300 rooms and extensive facilities.

Falling interest rates and expectations of lower initial yields have also increased interest from institutional investors. Although this has not yet led to many transactions in 2024, more and more of these parties seem to be preparing for purchases in the coming years. This is expected to have a positive effect on the investment volume. However, at the same time the supply of core hotels on the Dutch market remains limited.

With declining initial yields and the expectation of value increases, we are on the eve of a new investment cycle. The positive outlook for the hotel market, driven by rising tourism demand and limited supply growth in many cities, provides a solid foundation for rising room rates and operating profits. However, it remains crucial for investors to thoroughly analyze local market conditions in order to make informed investment decisions.

[1] In hotels, motels, guesthouses, youth accommodations and bed & breakfasts with at least 5 beds
[2] RevPAR is revenue per available room, a performance indicator calculated by dividing a hotel's total room revenue by the number of rooms and the number of days in the time period being measured.
[3] There is currently a lot of uncertainty regarding the proposed legislation. An impact analysis will first be conducted to determine the expected effects of the VAT increase on accommodations. This may lead to postponement or adjustments of these plans.
[4] The Financieele Dagblad is an important Dutch newspaper that focuses on economic and financial news

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