European Hotel Sector: Choosing the optimal operating structure and partner

April 11, 2024
Graeme McCormack
Head of Fund Management – Hotel & Leisure Division
Hugo Steen
Head of Investments – Hotel & Leisure Division
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The profitable outcome of a hotel investment depends on many factors. Macroeconomics, market, and location determine value potential (see the first and second papers in our European Hotel Sector series); demand-driven transformation determines realisation of that potential (see our third paper). But even the best-laid plans are dependent on the operating structure and partner to help manage risk and look for return opportunities.

The process of identifying the optimal operating structure and partner can be complex, and it requires careful consideration of factors such as targeted risk/return, flexibility desired, as well as market experience and expertise required. In this paper, we share some insights on selecting an operating structure and partner to optimise a value- add investment.

Key takeaways

  • Typical operating structures include a lease, a management contract, or a franchise. Which is best depends on a range of factors, including risk/return, operations involvement, experience needed, market segment, asset liquidity, and flexibility desired.

  • Operating partners can be hotel groups under one of their own brands or ‘white label’ groups operating under third party brands. Factors to consider when evaluating potential partners include track record, market penetration, market experience, and segment experience.

  • A hotel’s operating structure and operating partner can help manage risk and look for return opportunities, so careful selection is critical to success.

Selecting the right hotel operating structure and partner requires specialized knowledge to navigate the complexities of the hospitality industry successfully. Download the full paper for our insight.

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