Introduction

Airport Statistics

Tourism Demand

Hotel Supply and Pipeline

Between 2015 and 2022, the number of hotels increased from 401 to 457, accompanied by a rise in rooms from 15,808 to 16,988. It's worth noting that the methodology for counting establishments in Veneto region changed in 2022, contributing to the substantial growth observed that year. During the period from 2015 to 2019, the five-star hotel segment experienced the most rapid expansion in terms of the number of hotels, with a Compound Annual Growth Rate (CAGR) of +5.1%, while the three-star segment saw the fastest growth in terms of rooms, with a CAGR of +3.1%. Conversely, the "other" hotel segment witnessed a decline in both the number of establishments and rooms. Five-star hotels boasted the largest average room count, with 74 rooms in 2022, compared to 58 rooms for four-star hotels, 26 rooms for three-star hotels, and 16 rooms for other establishments.
  We identified an interesting pipeline primarily concentrated in the Venice Centre/Lagoon area, comprising approximately 1,500 rooms, representing around 9% of the existing supply. This pipeline comprises only hotels in the five-star (7 hotels, 784 rooms) and in the three-star (3 hotels, 749 rooms) segments. The Hampton by Hilton and the B&B Hotel are both greenfield constructions being developed in the Tronchetto area, while the other projects stem from the renovation and/or conversion of existing assets. More in detail, the Hotel Gabrielli will be managed by Starhotels after renovation, the historical Hotel Danieli is expected to fly the Four Seasons flag and Palazzo Donà Giovanelli is being transformed into Orient Express Venice (Accor). Les Airelles should result from the renovation of the ex-Bauer assets in Giudecca (Hotel Palladio and Villa F). Similarly, the NUMA Residenza Grunwald Venice should take shape through the renovation of the old Bauer Casanova, adjacent to the Bauer Hotel.

“Only You” Bonvecchiati, a brand under the Palladium Hotel Group, is anticipated to emerge from the fusion and refurbishment of the Hotel Bonvecchiati and the Palace Bonvecchiati. Hong Kong-based Langham Hospitality Group instead is in the process of converting an ex-glass factory on the island of Murano into an ultra-luxury hotel. Lastly, the Hotel Bauer Palazzo was slated to operate under the Rosewood brand after extensive renovation works. Following the crisis involving Signa, the former owner of the asset, the project appears to be on hold, as the new owner has yet to be determined.
  Hotel Operating Performance
We conducted an analysis of approximately 2,300 rooms spanning the period 2016-23, all positioned within the upper-upscale and luxury segments and located in the Centre/Lagoon area. The data indicate that occupancy rates in 2023 have returned to pre-pandemic levels, while the Average Daily Rates (ADRs), in line with what was observed in other Italian and European cities, experienced a substantial increase in 2022 and 2023. Consequently, both ADR and Revenue Per Available Room (RevPAR) experienced an increase of over 40% over 2019. It must be noted that occupancy rates of hotels in the upper-upscale / low five-star segments hover around 75% and that the reported figure is impacted by ultra-luxury properties and by some large hotels that operate seasonally.
  Hotel Investment Market
We have identified 18 transactions between 2019 and 2022 in Venice. In 2023, we are not aware of any significant hotel transaction taking place. The most significant transaction was the sale in 2019 of the Bauer portfolio: four assets, 290 keys for an estimated price of €400 million. The Bauer Palazzo was then resold to Signa in 2020 for a reported €250 million. Signa then filed for insolvency in late 2023. At the time of this article, Signa creditors are in a struggle to determine the new owner of the prestigious asset.

Other important transactions involved the Bonvecchiati Complex, the Hotel Baglioni Luna and the Hotel Excelsior Venice Lido, all sold for an estimated €100 million.
    Outlook
Venice has always been a market of strong hotel performance. However, rather than stimulating innovation and investment, this stability has inadvertently hindered the hotel market. In recent years, there have been few notable hotel transactions contributing to Venice being perceived as one of the markets with the highest barriers to entry in Italy. The city is characterized by a significant number of aging properties across all categories.

Looking forward, there is considerable investor and brand interest in Venice, particularly following the upturn in hotel performance over the past two years. However, greenfield projects are exceptionally rare due to the limited availability of land, and the conversion of existing buildings presents significant challenges, particularly of a bureaucratic nature. Therefore, with a scarcity of available properties for sale, many investors (and brands) find themselves unable to enter the market.

In the luxury segment there is some activity being observed, with seven projects in the pipeline totaling 784 rooms. Of these, 620 stem from the renovation and rebranding of existing hotel assets, and only 183 come from the conversion of non-hotel assets, of which 138 are in Murano (The Langham Venice). So, more than a proper pipeline of new hotels coming in, what is being observed is mostly the upward repositioning of existing assets where the spread between actual and potential performance created room for negotiation. Hotels in the lower segments, instead, tend to be small in size on average, which makes them less appealing to both brands and investors. Therefore, with the exception of the upcoming Hampton and B&B Hotels bringing new, modern inventory in the segment, the market in these categories is expected to remain largely unbranded, especially in the centre. Additionally, many of these hotels, predominantly family-run establishments, lack the resources and innovation capabilities to renovate their properties and enhance their offerings and are therefore expected to suffer the most from the competition with vacation homes in the future. However, there may be some transaction activity involving these assets in the future, driven by refinancing needs, generational transitions or the potential for achieving better performances by affiliating with more flexible “collection brands”. This could potentially catalyse the development of an intriguing boutique hotel scene in Venice.

Finally, it's worth mentioning that there are some interesting projects in the feasibility and design stages on Murano Island. These projects (mostly) involve the potential conversion of disused glass factories, similar to what is being done with The Langham Venice, and are currently under evaluation.