Author: Sevda Cadîr MRICS, Head of Feasibility and Valuations Win Advisors
Author: Plamen Bachev MRICS, Associate Partner Win Advisors
CEE-6 countries (Bulgaria, Czech Republic, Hungary, Romania, Slovakia, and Poland) closed 2025 with a full recovery in arrivals at a regional level, with Poland playing a crucial role in reinforcing overall growth. Demand continued its upward trajectory, increasing by approximately 5% compared to 2024. This performance was further supported by strong growth in Bulgaria, which recorded an increase in arrivals of approximately 6% year-on-year. This growth was primarily driven by international demand, which rose by around 10% compared to 2024.
While demand levels have now aligned with pre-pandemic benchmarks, the structure of that demand has evolved. Travel patterns across Europe indicate a shift toward more regional and experience-driven consumption. Travellers are increasingly prioritizing off-the-beaten-path destinations, showing growing interest in wellness-focused travel, extending beyond traditional spa concepts into longevity and overall well-being. This is accompanied by the rise of “slow travel,” as well as a stronger preference for authenticity, nature-based experiences, and personalized stays. At the same time, budget sensitivity remains present, influenced by ongoing geopolitical and economic uncertainty. This has reinforced the importance of value-driven offerings, while accelerating the evolution of hotels into social and lifestyle hubs rather than purely accommodation providers.
From a performance perspective, the region is entering a more balanced phase. Rate growth has moderated compared to the sharp increases seen in the post-pandemic period, while occupancy levels have gained additional momentum. As a result, overall revenue performance continues to improve, supported by both demand recovery and pricing strength. In many markets, RevPAR levels have surpassed 2019 benchmarks, reflecting a structurally stronger revenue base despite ongoing cost pressures. In this context, well-defined commercial strategies and agile operational models are becoming essential for sustaining profitability.
Bulgaria remains one of the largest markets in terms of hotel supply within the CEE-6 region, benefiting from its established tourism infrastructure and strong leisure positioning. In 2025, the market was predominantly driven by international demand, accounting for approximately 56% of total overnight stays, with an average length of stay of around four days, largely influenced by the leisure-oriented nature of the destination.
Focusing on Sofia, the city remains the primary demand driver as a standalone urban market, recording demand growth of approximately 9% compared to 2024. This was mainly supported by international demand, which increased by around 11% and accounted for approximately 68% of total demand in the capital. While demand continues to strengthen, rate growth has been more moderate, with overall revenue performance primarily driven by volume increases. Combined with the recent euro adoption trajectory and sustained demand growth, this creates strong opportunities for further development to capture unmet demand, not only in Sofia but across Bulgaria as a whole.
This is further reflected in Sofia’s hotel pipeline, which is expected to grow at a CAGR of approximately 3.3%, adding around 1,500 rooms by 2030. The pipeline is well diversified, ranging from midscale to luxury segments, with a strong presence of branded developments. A notable trend is the increasing focus on lifestyle hotels, aligned with demand for authenticity and personalization. Additionally, development is expanding beyond the traditional city centre, with new hotel clusters emerging in areas supported by office and logistics infrastructure, creating a more diversified and sustainable demand base.
Beyond Sofia, Bulgaria is also seeing growing development activity in mountain and seaside destinations, with approximately 2,500 additional rooms expected to enter the market. These projects are positioned to capture evolving European travel demand, particularly in segments focused on nature, relaxation, well-being, and social-driven hospitality concepts that cater to both local and international guests.
Investment Outlook: Bulgaria Hotels in a CEE Context
Within the Central and Eastern European landscape, Bulgaria continues to position itself as a high-yield, low-liquidity market, still lagging behind more mature peers such as Poland and the Czech Republic in terms of transaction depth, institutional ownership, and product quality. While markets like Warsaw and Prague have already experienced significant yield compression driven by sustained institutional capital inflows, Bulgaria maintains a pricing gap of approximately 200–300 basis points for prime hotel assets. This spread reflects not only higher perceived risk and structural inefficiencies, but also a clear potential for future re-rating as the market evolves. At the same time, the country benefits from stronger relative tourism growth, positioning it as a high-beta opportunity within the CEE hospitality sector.
Prime hotel yields in Sofia are currently estimated at 8.75%–9.0%, placing the market among the most attractive in Europe from an income return perspective. However, these yields must be viewed in context. Pricing remains highly asset-specific, with limited transactional evidence, a wide bid-ask spread, and significant divergence between institutional-grade and secondary assets. Current yield levels incorporate a combination of liquidity premium, market entry premium, and development and operational risk, particularly in the absence of branded and stabilized product. As a result, Bulgaria today offers primarily development-driven returns rather than stabilized income plays.
Transaction activity remains subdued and fragmented, with the market characterized by predominantly off-market deals, relatively small transaction sizes, and a lack of portfolio or platform transactions. Structural liquidity constraints continue to limit market maturity, as the absence of institutional-grade product, transparent pricing benchmarks, and international brokerage processes restrict efficient price discovery. At the same time, this lack of liquidity creates a window of opportunity for early-stage investors capable of entering ahead of broader capital flows.
The investor base is currently dominated by domestic and entrepreneurial capital, including high-net-worth individuals and developer-investors focused on yield-on-cost strategies and double-digit returns. These players are typically comfortable with development and operational exposure and rely less on leverage compared to institutional investors. International capital remains limited but is expected to gradually enter the market through operator-led investments, joint ventures, and platform aggregation strategies as market conditions evolve.
Looking ahead, the trajectory of the Bulgarian hotel investment market will be closely linked to the broader European interest rate cycle and bond yield environment. Elevated base rates have so far supported higher required returns, while the spread between hotel yields and sovereign bonds remains attractive but not fully arbitraged due to perceived risk. As financing conditions improve and interest rates stabilize or decline, this spread is expected to compress. Bulgaria’s integration into the Eurozone further strengthens this outlook by eliminating currency risk and reducing macroeconomic uncertainty, creating a more favorable environment for international capital inflows.
Bulgaria is now entering the early stage of a new investment cycle, gradually transitioning from a development-led market toward a more institutional and income-driven environment. Over the medium term, this shift is expected to result in yield compression for prime assets, increased transaction volumes, and the emergence of larger and more structured deals, including portfolio transactions. The key enablers of this transition will be the delivery of branded, investment-grade assets, improved market transparency, and deeper integration with European capital markets.
In this context, Bulgaria’s hotel sector offers a compelling combination of strong operational fundamentals and elevated yield levels, supported by sustained tourism growth and ongoing supply development. While the market remains inefficient and undercapitalized, this imbalance creates a clear first-mover advantage. Investors capable of underwriting development and operational risk, and taking a medium-term view on market convergence, are well positioned to capture both income returns and capital appreciation as Bulgaria continues to align with broader CEE investment benchmarks.