Hotel property

A hotel property is a real estate asset that is designed, furnished, and approved for the operation of a hotel or a comparable lodging facility. In addition to the building containing guest rooms, it also includes restaurant areas, conference rooms, reception areas, underground parking garages, and technical infrastructure. Hotel properties are classified as special-purpose real estate, as their value is closely linked to operational performance (occupancy rate, room rate, revenue) and cannot be assessed solely based on structural characteristics.

Valuation of Hotel Properties

The valuation of a hotel property is generally performed using the income approach, in which the sustainable operating surplus (EBITDA or GOP) is capitalized. Since the value depends heavily on the operating concept, a distinction is made between operator-dependent values (with an existing tenant/franchise) and operator-independent values (what would the property be worth without the current operator?). International standards such as USALI (Uniform System of Accounts for the Lodging Industry) are also used in hotel valuation.

In addition to the income value, the asset value-that is, the structural condition of the building, the quality of the room furnishings, and the quality of the technical infrastructure-is an important value factor. Hotels are subject to high usage intensity and must be renovated regularly (typically every 7-10 years for major renovation cycles). A backlog in facility investments directly impacts occupancy rates and achievable room rates, significantly reducing the property’s value.

Hotel Properties as Investments

As investment properties, hotel properties offer potentially attractive returns but are more sensitive to economic cycles than traditional residential or office real estate. Operations depend on tourism, business travel, and events. Lease and management contracts with hotel chains provide planning security but can limit the owner’s flexibility.

Under lease agreements, the operator pays a fixed lease to the owner, regardless of operating performance. Under management agreements, the hotel chain assumes operational management in exchange for a management fee, and the owner bears the business risk directly. The choice of contract structure has a significant impact on risk allocation and the property’s financeability.

When purchasing a hotel property, comprehensive technical and legal due diligence-including verification of building permits, restaurant licensing, and environmental regulations-is essential.

Repurposing of Hotel Properties

Vacant hotel properties offer interesting potential for repurposing: nursing homes, boarding houses, student dormitories, or micro-apartments are possible alternatives. However, such repurposing requires reviews under building and permitting laws, as hotel properties are often classified as special-use buildings and have specific fire safety and emergency exit requirements. Anyone wishing to repurpose a former hotel property for residential use requires a change-of-use permit, the complexity of which can vary depending on the location and urban planning regulations.

We assist investors in evaluating such opportunities in the region and coordinate contacts with specialized experts, architects, and attorneys.

Practical Tip for Property Owners in Nuremberg and Franconia

The Nuremberg metropolitan region is an attractive hotel market due to its status as a trade fair venue (Toy Fair, embedded world, BIOFACH) and a tourist destination. Hotels with good city access and conference facilities achieve stable occupancy rates. Anyone wishing to buy or sell a hotel property in Nuremberg or the surrounding area should consult specialists in hotel real estate who are familiar with both the business and real estate aspects.

For conversion projects, the issue of zoning regulations is particularly crucial: Is the hotel property located in an area that also permits residential use, or is it restricted to commercial use? We have the necessary networks and can connect you with suitable contacts for valuation, planning, and transaction support.

Frequently Asked Questions

How is the value of a hotel property determined?

The value is primarily derived from the sustainable operating surplus, capitalized using a market-standard multiple (typically 12-18 times EBITDA, depending on location and quality). The property’s net asset value is also taken into account.

What permits do I need to operate a hotel?

In addition to a building permit, a restaurant license, fire safety certificates, a lodging permit, and-for restaurant operations-a food safety license are required. For larger properties, public assembly venue regulations and other special provisions apply.

Can a hotel property also be used privately as a vacation home?

Generally not-hotel properties are approved as commercial real estate and may not be permanently occupied for private use. Private use would require a rezoning, which has implications under building and tax laws.

What are the risks associated with a hotel property as an investment?

The main risks include fluctuations in occupancy rates (dependent on the economy and tourism), operator risk (insolvency of the lessee or management partner), investment bottlenecks, and changing market conditions due to platforms like Airbnb. Thorough due diligence and an experienced operator significantly mitigate these risks.

Classification and Brand Influence on Value

Hotels are classified by recognized systems such as the HotelStars Union (star rating) or international brands (franchise, flagging). Brand affiliation has a direct impact on property value: A property operating under an established franchise label (e.g., an international chain brand) typically achieves higher mortgage lending values and better suitability for alternative uses than an independently managed individual hotel. On the other hand, a franchise agreement binds the owner to equipment standards and renovation cycles that require regular investment. When valuing a hotel property, it is therefore always necessary to examine how long existing franchise or lease agreements remain in effect and under what conditions they can be renewed or terminated.

Technical Requirements and Maintenance Backlog

Hotel properties are subject to high technical requirements: fire safety and emergency exit systems must comply with current regulations; building services (heating, ventilation, plumbing) are particularly prone to wear and tear due to intensive use; and guest room furnishings quickly become outdated. A frequently underestimated risk factor when purchasing a hotel property is the backlog of necessary investments: If a property has not been renovated for several years, the required follow-up investments are often substantial-and they not only reduce the purchase price but must also be factored into the financing plan. We recommend commissioning a technical assessment as part of the due diligence process to quantify the maintenance backlog.

Boardinghouses and Aparthotels as a Hybrid Form

In addition to the traditional hotel, there is growing demand for boardinghouses and aparthotels-accommodation types where guests stay for periods ranging from a few weeks to several months. Legally and fiscally, this form of use falls between a hotel and residential real estate, allowing for more flexible marketing. Boardinghouses are attractive to investors because they require less capital-intensive amenities, appeal to a broader tenant base, and can be more easily converted into regular apartments in the event of vacancies. In Nuremberg, there is growing demand for such options, particularly among project workers in the industrial and IT sectors who are assigned to the region on a medium-term basis.

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