Dublin, Milan and Madrid lead the way in terms of European ‘hot’ cities for hotel investment, fresh research shows.

The study, conducted by Savills, ranked cities according to their underlying operational performance fundamentals and relative value, enabling the company to compile a list of the top 10 European cities for hotel investments, based on factors including the overnight visitor market, GDP and employment growth forecasts, stock levels relative to demand and indicative prime yields as of Q1 2017.

Savills says that the top 10 cities, which can be viewed here, are markets where the prospects for income security alongside capital preservation and capital growth look robust moving forward.

Tim Stoyle, head of hotels valuation at Savills, said: “The analysis highlighted there are still a number of cities in Europe that offer good ‘value’ prospects in light of the outlook for operational performance going forward.

“Top ranking Dublin, for example, has been one of the best performing European cities in terms of RevPAR [revenue per available room] growth over recent years which looks set to continue as new development remains constrained.”

Across Europe, there is growing interest from investors looking for both the income and capital value growth provided by hotels, according to Rob Stapleton, director in the hotels team at Savills.

He commented: “Dublin has experienced a recent rise in institutional investment, whereas markets like Milan and Madrid are being driven by private equity investors and owner-occupiers looking for hotels with both development and income growth potential.”