How do ownership and operating models influence a hotel’s success? What role do distinctive concepts and brands play, and what do investors and lenders expect from hotel projects? These questions framed the discussion at “Salon Hotel”, an evening jointly hosted by Watson Farley & Williams, mrp consulting and IBCOL at Haus im Tal in Munich.
Alexander Haas (KOKOMO Hospitality AG), Martin Schaffer (mrp hotels), Andreas Striegel (IBCOL), Tobias Kümmel (IBCOL) and Jörn Fingerhuth (Watson Farley & Williams) explored the opportunities and challenges of the owner-operator model compared with other operating and management structures. The discussion examined how food and beverage offerings, events, connections with the local community and the effective use of space can contribute to a distinctive hotel concept and brand.
The panel also explored how investors, lenders and operators assess opportunities in today’s hospitality market, and discussed the commercial, operational and legal considerations that underpin successful hotel developments and long-term value creation.
What do these insights mean in practice? The panellists share their key takeaways from the discussion below.
Martin Schaffer
mrp hotels
The framework conditions for hotel investments have changed significantly in recent years. Hotel real estate is now viewed by many investors as an attractive asset class, although the sector still has some way to go before being considered a true core asset. Transactions and developments remain feasible; however, the requirements relating to concepts, financing and execution have increased considerably. To succeed in today’s market, stakeholders must accept these new realities and adapt their strategies accordingly. In particular, commercial strategy, automation, digitalisation and strong branding are becoming increasingly critical drivers of long-term financial performance.
Key takeaways:
- Hotel real estate continues to gain attractiveness as an asset class, although it is not yet universally recognised as a core investment.
- Transactions and development projects remain viable but have become more complex, requiring a greater degree of professionalism across all areas.
- Successful hotel operations increasingly rely on a clear commercial strategy, digitalisation, automation and a strong brand presence.
Tobias Kümmel & Andreas Striegel
IBCOL
The first SALON HOTEL in Munich showed how much the hospitality sector is in motion. Owner-operator models prove that flexibility pays off and helps concepts to develop successfully within their niche. Financing remains challenging, but market participants are no longer waiting for old conditions to return and are adapting to the new reality. Office conversions are an exciting opportunity for both serviced apartments and hotels, as they can give existing buildings a new future. However, they have yet to prove themselves in the market. What the evening made clear: close exchange between owners, operators, investors and financiers is key to making new concepts work.
Key take aways:
- flexibility in owner-operator models is helping the sector to develop within this niche;
- financing remains difficult, but the sector is adapting to the new reality; and
- office conversions are an exciting prospect for both serviced apartments and hotels, but they have yet to prove themselves in the market.
Jörn Fingerhuth
Watson Farley & Williams
Flexibility has become a key priority for hotel operators, with gross operating profit (GOP) now the most important measure of operating performance. Contractual structures increasingly reflect this shift: hotel leases are incorporating elements traditionally associated with management agreements, creating hybrid models that allow for greater flexibility. At the same time, distressed investments and transactions are a major market theme. Owners frequently seek vacant possession to retain operational and strategic freedom. However, that flexibility can complicate a subsequent exit to institutional investors. The challenge is to balance operational adaptability today with a structure that supports a successful institutional exit tomorrow.
Key Takeaways:
- flexibility and profitability are driving operator priorities. Flexibility is a key requirement across hotel operators, while GOP has become the central measure of operating performance;
- hotel contracts are becoming more hybrid. Leases increasingly incorporate elements of management agreements, reflecting the growing need for more flexible contractual structures; and
- distressed opportunities require an early focus on exit strategy. Vacant possession can give owners greater freedom but may make a subsequent sale to institutional investors more challenging. Operational flexibility and exit requirements need to be considered together.
To discuss any of the topics covered, please get in touch with Watson Farley & Williams, mrp consulting or IBCOL.
