Report
Italy: Construction and renovation costs in hospitality
With this latest report from Horwath HTL Italy, we shed light on the world of CapEx in Italian Hospitality.
This is the very first report of its kind for Italy, covering the cost of building, converting or renovating hotels and resorts. The report tries to shed light on the world of CapEx associated with hospitality development in Italy.
We have collected 63 projects (finally reduced to 50 after data cleaning), totalling over half billion Euros of investments in over five thousands rooms. Through this database, we are able to present what is the per room cost and the sqm cost associated to light or heavy renovations, new buildings or conversions, for several market segments.
The data shows that Italy is a very peculiar market for CapEx planning: due to the massive amount of hotels located in historic buildings, which are pretty delicate to approach, renovating in the luxury scale in a top destination may often cost more than building on greenfield.
Moreover, unexpectedly, we discovered that branded and independent hotels are not different in terms of CapEx requirements in greenfield developments.
Overview
The analysis covers 63 projects (reduced to 50 after data cleaning) with over 530 million Euros invested in more than 5,570 rooms. The survey focuses on both greenfield developments and renovations, providing cost benchmarks per room and per square meter for various market segments.
- Costs: Excludes administrative costs, asset/land purchasing, VAT, and includes FF&E costs.
- Construction: Refers to building new properties (greenfield), including FF&E costs.
- Renovation: Covers heavy or light renovations, including FF&E costs.
- Hospitality: Includes hotels, student/hostel hotels, and resorts.
- FF&E: Furniture, Fixtures, and Equipment.
Key Findings
Greenfield Developments
- Rarity and Costs: Greenfield projects are rare but account for 20% of the panel, with an average cost of 147.5 thousand Euros per key.
- Cost per Square Meter: The average building cost is 2,000 €/sqm.
- Segmentation:
- City Hotels: 1,843 €/sqm (109k €/key).
- Resorts: 2,311 €/sqm (161k €/key).
- Destination Costs:
- Top Destinations: 147k €/key.
- Secondary Destinations: 142k €/key.
- Management Model:
- Branded Hotels: 2,174 €/sqm (137k €/key).
- Independent Hotels: 2,062 €/sqm (152k €/key).
Heavy and Light Renovations
- Prevalence and Costs: Renovations are more common than new builds, especially in historic buildings.
- Cost per Square Meter: The average renovation cost is 1,300 €/sqm.
- Segmentation:
- City Hotels: 1,415 €/sqm (94k €/key).
- Resorts: 916 €/sqm (52k €/key).
- Destination Costs:
- Top Destinations: 108k €/key.
- Secondary Destinations: 60k €/key.
- Building Type:
- Historic Hotels: 1,729 €/sqm (123k €/key).
- Modern Hotels: 887 €/sqm (55k €/key).
- Management Model:
- Branded Hotels: 2,174 €/sqm (137k €/key).
- Independent Hotels: 2,062 €/sqm (152k €/key).
FF&E Costs
- Greenfield Developments:
- City Hotels: Midscale (10,810 €/room), Upscale (28,090 €/room), Luxury (34,440 €/room).
- Resorts: Midscale (6,589 €/room), Upscale (14,016 €/room), Luxury (31,048 €/room).
- Renovations:
- City Hotels: Midscale (6,589 €/room), Upscale (14,016 €/room), Luxury (31,048 €/room).
- Resorts: Midscale (9,368 €/room), Upscale (9,368 €/room).
The data reveals that construction and renovation costs in Italy are relatively low compared to other regions, but the complexity of projects, particularly in historic buildings, can lead to higher CapEx. The primary challenge in the Italian market is not the cost itself but bureaucratic and administrative hurdles that slow down project execution.
This report provides a comprehensive benchmark for analysts and investors to plan their CapEx for hospitality projects in Italy, offering a foundation for further research and strategic planning.
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