The structural problem of Italian hospitality
The vulnerability of the Italian hospitality sector is a long-standing structural issue, compounded over decades, in part due to a development model that has prioritised quantity over quality and family management over professionalization. Out of approximately 32,000 hotel establishments across the country, only 6–7% are affiliated with international chains, while around 7,000 are inactive, as reopening costs would exceed expected revenues.
This is compounded by a lack of maintenance: international brands invest up to 5% of the asset value annually in renovations; the typical Italian family does not, resulting in a hospitality asset base that is progressively deteriorating. This premise is key to understanding the dynamics that have characterised the sector in recent years and for outlining the development prospects of an industry that requires a profound rethinking.
The champagne season: good while it lasted
The pandemic that paralyses the sector in 2020-21 subsequently generated, during the reopening phase, a phenomenon known in the industry as the “champagne season.” In the 2022-2023 two-year period, high demand and strong traveller spending upended traditional Revenue Management logic: rates previously set at €900 per room rose to €1,500-1,600, while still achieving full occupancy.
The strategic mistake was not seizing the cyclical opportunity but interpreting it as a permanent structural shift in the market.
2024: reality takes back centre stage
2024 marked a clear break. Properties that maintained the same pricing policies as in the previous two years experienced significantly reduced performance. For example, a newly opened luxury hotel in Rome that kept rates up to €1,600 per night saw occupancy drop below 20%.
Conversely, operators adopting a more calibrated pricing approach, averaging around €900-1,000, achieved occupancy rates above 60%, confirming that strategies focused on optimising total revenue rather than maximising the unit rate were superior.
The most significant phenomenon was that of delayed panic: properties that, after maintaining high prices, faced insufficient demand and implemented disordered, sometimes excessive price reductions. This behaviour, easily interpreted by the market as a sign of weakness, further undermined their competitive positioning.
Experiential ultra-luxury and the risk of undefined positioning
Not all high-end segments are experiencing the same difficulties. One category has shown strong resilience: experiential ultra-luxury. Properties operating successfully in this segment do not merely offer high-end accommodation in a cultural destination; they build a comprehensive, non-replicable experience, from exclusive access to museums and private itineraries to highly customised services. In this context, rates exceeding €2,000 per night are fully commercially justified.
The most significant issue concerns properties that have heavily invested in real estate assets, positioning themselves as luxury products with the ambition to compete with internationally established operators, yet without developing the differentiated experiential offering that justifies premium pricing. For these properties it is essential, particularly during financing discussions, to clearly acknowledge the need to recalibrate pricing expectations realistically.
Major global groups and the race for niche brands
One notable trend is the accelerating expansion of major global operators. Marriott, Jin Jiang International and Hilton Worldwide each now manage over one million rooms, with IHG Hotels & Resorts, Wyndham and Accor close behind, each exceeding 800,000 rooms.
However, the required growth pace and cultural distance from local markets make the creation of new brands from scratch unfeasible: the response is acquisition. Marriott has acquired CitizenM, an urban three-star brand present in 30 cities, and now has 30 brands; Accor has incorporated 25hours.
The underlying logic is consistent: local operators, equipped with deep knowledge of their territory and demand behaviour, identify a niche, build a recognisable and scalable brand around it and eventually become targets for large global distribution platforms.
For the Italian market, this dynamic represents both an opportunity and a warning. Those able to anticipate local demand shifts and build a distinctive product identity can create significant value, which is potentially attractive to international players. Conversely, those who take a wait-and-see approach risk being excluded from a competitive space already occupied by others.
White label vs. branded hotels
Italy also offers compelling examples of independent properties capable of competing, and often excelling, without the support of an international brand. It is in this segment in particular that the distinctive values of Italian hospitality express their full potential: attention to detail, personalised service and strong local roots.
However, to achieve outstanding results, direct and continuous commitment from ownership is required, both in terms of investment and operational management. In this context, a growing trend is emerging: demand, from both Italian and international guests, for tailored, authentic and unique hospitality, which large brands structurally struggle to deliver.
The midscale segment: a largely untapped opportunity
One of the most relevant themes for the next cycle is the near-total absence of renewed supply in the three- to four-star segment. What the Italian market requires isn’t cosmetic upgrades to existing stock, but a radical revision of the product model.
Two operators currently in the portfolio illustrate the most promising direction:
- Yellow Square, an Italian brand spanning from hostel to boutique hotel, with lower room rates and incremental revenue generated through experiences;
- Room00, a Spanish brand that converts disused office spaces into entry-level four-star hotels, with rates between €150 and €200 and competitive development timelines.
The market does not wait
The Italian hotel sector is now at a crossroads. On one side is a largely obsolete accommodation stock, managed with family-based approaches that are inadequate for the challenges of an increasingly competitive and globalised market; on the other, the need to renew at historic scale, representing a concrete and measurable opportunity for operators capable of interpreting market signals.
The variables at play are clear: those who invest today with a precise vision of their product identity and target demand segment can position themselves to capture value—both in the end-customer market and in the equally relevant market of acquisitions by major international groups. Those who wait, or worse, continue operating with pricing and management models disconnected from market realities, risk missing the window of opportunity altogether.
