Many hotel owners see a hotel lease agreement as a simple solution: find an operator, agree on a rent, transfer the operating risk and turn the property into an income-producing asset.
That view is understandable.
But it is incomplete.
A hotel is not merely a property that generates rent. It is a complex operating business built on goodwill, reputation, staff, licences, market positioning, maintenance, operating standards, guest databases, commercial agreements, distribution channels and the ability to generate margins over time.
For this reason, when a company leases out a hotel business, the key question should not be only:
“Is the contract valid?”
The more important question is:
“Does this contract protect or erode the value of the hotel?”
A recent ruling by the Court of Ancona, 14 May 2024, no. 985/2024, offers a particularly useful perspective for hotel owners, investors and hotel companies. The principle is clear: a business lease agreement entered into by the director of an Italian limited liability company, without prior shareholder approval, does not automatically amount to a substantial change in the company’s corporate purpose, unless it is proven that the transaction caused the company to cease its operating activity and produced a stable change in its business risk profile.
For the hotel sector, however, the most important lesson is broader: the formal legitimacy of a transaction does not guarantee the strategic quality of the decision.
A contract may be valid, but economically weak.
It may generate rent, but reduce the value of the business.
It may transfer operations, but cause the owner to lose strategic control of the asset.
The principle of the ruling: leasing out the business does not always mean emptying the company
The Court of Ancona clarified that the mere fact of leasing out a business is not enough to argue that the company has changed its corporate purpose.
According to the ruling, anyone challenging the validity of the transaction must allege and prove that the lease resulted in an actual emptying of the company’s business activity, turning it into a substantially passive entity limited to collecting rent.
This principle is highly relevant in the hotel industry.
A company that owns or operates a hotel may entrust management to a third party without necessarily giving up its entrepreneurial role. A business lease may be a tool for continuity, restructuring, asset protection or value enhancement.
The problem arises when the transaction is not properly governed.
If the owner loses visibility over operations, does not monitor the condition of the business, and fails to oversee maintenance, reputation, staff, standards and commercial positioning, the issue is no longer only legal.
It becomes a question of asset protection.
Because in hospitality, value is rarely destroyed all at once. It is gradually eroded: deferred maintenance, poor pricing decisions, declining online reputation, untrained staff, lost customers, weakened brand equity.
At the end of the contract, the hotel may be formally returned.
But it may no longer be the same business.
What many hotel owners underestimate: rent is not value
One of the most common mistakes in hotel lease structures is assessing the deal almost exclusively on the rent.
The owner compares offers, chooses the highest rent and considers the evaluation complete.
But in the hotel industry, rent is not only income for the owner. It is also a fixed cost for the operator.
If the rent is too high in relation to the hotel’s real earning capacity, the contract is fragile from the start. To protect margins, the operator may reduce costs, maintenance, staffing, service quality and commercial investment.
The result can be paradoxical: the owner collects an apparently attractive rent today, but tomorrow receives back a weakened business.
Excessive rent can produce three effects:
1. Compression of management quality
The operator cuts what is not immediately visible: maintenance, training, standards, staffing and product care.
2. Loss of commercial positioning
The hotel starts selling worse, becomes more dependent on OTAs, loses pricing power and damages its reputation.
3. Increased risk of conflict
When the rent is not sustainable, the relationship tends to deteriorate: delays, disputes, renegotiation requests and litigation.
Rent that is too low, on the other hand, may damage the owner if it does not reflect the asset’s potential or if it is not supported by variable mechanisms linked to performance.
The correct evaluation therefore does not start with the question:
“How much will they pay me?”
It starts with a different question:
“Does this model preserve the balance between the operator’s profitability, the owner’s control and the hotel’s value creation?”
Business lease, management contract or franchise: the choice is not contractual, it is strategic
In the hotel market, there are several ways to separate ownership, operations and brand: business lease, hotel lease, management contract, franchise, hybrid agreements, or direct management supported by external management expertise.
The point is not to choose the most common model.
The point is to choose the model that is consistent with the asset, the owner, the market and the investment objectives.
As explained in the guide Management contract, lease or franchise? How to avoid clauses that destroy value in your hotel, the real issue is not only who manages the hotel, but how the contract allocates control, risk, remuneration, data, capex and decision-making power among owner, operator and brand.
This is the key point.
A business lease may protect the owner, but it may also make the business rigid.
A management contract may create value, but it may also transfer too much power to the operator if it is not properly structured.
A franchise may strengthen market positioning, but it may also generate fees, obligations and constraints that are difficult to manage.
For this reason, the choice of contract should not begin with a negotiation over rent.
It should begin with a strategic diagnosis of the asset.
The checks to make before leasing out a hotel business
Before signing a hotel lease agreement, the owner should assess at least eight areas.
1. Corporate powers and governance
The Court of Ancona ruling confirms that a director may have broad powers, but this does not mean that every transaction should be handled without proper corporate oversight.
In family-owned hotels, companies with several shareholders or properties held within broader investment structures, it is advisable to verify the articles of association, corporate purpose, directors’ powers, any internal limitations, shareholder resolutions and the consistency of the transaction with the company’s interest.
Governance is not only about preventing disputes.
It is about making the transaction stronger.
2. Economic sustainability of the rent
The rent should be assessed on the basis of real hotel data: occupancy, ADR, RevPAR, GOP, labour costs, energy costs, maintenance, required capex, seasonality and competitive landscape.
A sustainable contract is not the one with the highest rent.
It is the one that allows the operator to pay, invest, maintain standards and create value.
3. Operational quality of the operator
Not all operators are the same.
In hospitality, the quality of an operator is measured through revenue management, distribution, cost control, staff management, online reputation, maintenance, operating standards, commercial capability and performance culture.
Entrusting a hotel to an inadequate operator can turn an attractive rent into a deferred loss of asset value.
4. Protection of goodwill
Hotel goodwill is fragile.
It is built over time and can be damaged quickly.
The contract should regulate brand use, service standards, online reputation, guest databases, relationships with OTAs and agencies, commercial continuity, staff, maintenance, reporting obligations and handback conditions.
Without these clauses, the owner risks losing control over what makes the hotel truly competitive.
5. Investments and maintenance
Many hotel lease agreements break down over the distinction between ordinary maintenance, extraordinary maintenance, capex, improvements and regulatory upgrades.
Who pays for investments?
Who decides the works?
Who monitors the condition of the property and systems?
What happens if the operator postpones essential maintenance?
How is the business handed back at the end of the contract?
If these answers are not written into the contract beforehand, they will become problems later.
6. Reporting and operational control
The owner should not simply collect rent.
The owner should receive regular reports on occupancy, ADR, RevPAR, financial performance, reviews, maintenance, investments, staff and commercial positioning.
Control does not mean interfering in day-to-day management.
It means protecting the value of the business.
7. Guarantees and protective clauses
Security deposits, bank guarantees, termination clauses, insurance obligations, penalties, operating covenants and exit provisions must be calibrated to the real risk of the transaction.
The guarantee should not only protect against unpaid rent.
It should also protect against deterioration of the business.
8. Exit strategy and handback
The end of the contract is often the most underestimated moment.
A hotel is not handed back like an apartment.
Inventory, licences, staff, contracts, management data, maintenance, brand, sales channels, reviews, databases, suppliers and commercial continuity must all be regulated.
A well-structured contract does not only look at the beginning of the relationship.
It looks above all at its conclusion.
Liability action against the director: it is not enough to say the transaction went badly
The ruling also deals with liability actions against directors under Article 2476 of the Italian Civil Code.
The Court recalls that, in a claim against a director, the claimant company must allege and prove unlawful conduct, the actual damage suffered and the causal link. A court-appointed expert report cannot compensate for insufficient allegations or lack of evidence.
For the hotel sector, this is highly relevant.
A business lease may prove economically disappointing, but this does not automatically create liability for the director.
To support a serious claim, it is necessary to prove that the director breached management duties, accepted incongruous terms, omitted essential checks, ignored available alternatives or caused measurable economic damage.
Here again, the issue comes back to numbers.
Before challenging or defending a hotel lease transaction, it is necessary to reconstruct:
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the value of the business before signing;
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the economic terms of the contract;
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the alternatives actually available;
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the hotel’s operational and financial condition;
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the sustainability of the rent;
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the reliability of the operator;
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the impact on goodwill;
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the effects on business continuity;
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any damage actually produced.
Without this analysis, litigation risks being based more on perceptions than on technical evidence.
When Hotel Management may be more consistent than a lease
A business lease is not wrong in itself.
In some cases, it is the right tool.
But it is not the only possible model.
When the owner wants to retain greater strategic control over the asset, preserve goodwill, govern investments and directly monitor performance, a Hotel Management model may be more consistent.
The difference is substantial.
In a lease, the centre of the transaction is rent.
In a Hotel Management model, the centre of the transaction is performance.
With a well-structured management agreement, the owner can entrust operations to a professional operator while retaining oversight over budget, standards, investments, positioning, reporting, financial results and long-term value creation.
It is the most appropriate model when the objective is not simply to “put the hotel to income”, but to build a growth, repositioning or turnaround path.
For this reason, in the most delicate hotel transactions, the right question is not:
“Can I find someone who will pay me rent?”
The right question is:
“Which operating model maximises the value of the hotel while reducing operational risk?”
The answer may be a lease.
Or a management contract.
Or a hybrid solution.
But it must be a designed choice, not a passive one.
The real lesson for hotel owners, investors and hotel companies
The Court of Ancona ruling clarifies an important legal principle: a business lease entered into by a director does not automatically amount to a substantial change in the company’s corporate purpose.
But for the hotel sector, the more useful lesson is another one.
A transaction may be formally legitimate and strategically weak.
It may be legally valid, but economically dangerous.
It may generate immediate rent, but compromise the future value of the asset.
For this reason, a hotel lease should be treated as a matter of governance, asset management and operating strategy, not as a simple contract for use.
The owner should ask:
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am I transferring only management, or also control over value?
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is the rent sustainable, or does it push the operator to impoverish the hotel?
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does the contract truly protect goodwill?
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do I have visibility over performance?
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do I know what happens at expiry?
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is the lease the best model, or is a Hotel Management solution more consistent?
Those who answer these questions before signing protect the asset.
Those who ignore them risk discovering the problem only after value has already been consumed.
Conclusion
A lease is a useful tool, but it is not neutral.
In the hotel industry, it can guarantee continuity, income and value enhancement. But it can also generate loss of control, deterioration of goodwill and corporate disputes.
The Court of Ancona ruling helps clarify that the issue is not only who has the power to sign.
The issue is whether that signature creates or destroys value.
Because a hotel should not be measured only by the rent it produces today.
It should be measured by its ability to generate value tomorrow.
CTA — Before signing, assess whether a lease is truly the right model
If you are considering a hotel lease agreement, a management contract or another operating structure, the most important step is not immediately negotiating the rent.
It is understanding which model best protects the value of the hotel.
Hotel Management Group supports hotel owners, investors and hotel companies in assessing and building sustainable, controllable and value-driven operating models.
Through a technical analysis of the asset, the market, potential profitability, contractual risk and management quality, we help owners choose between lease, Hotel Management, assisted direct management or hybrid solutions.
Visit HotelManagementGroup.it to assess the most suitable model for your hotel.
To explore the differences between management contract, lease and franchise in more depth, read the guide:
Management contract, lease or franchise? How to avoid clauses that destroy value in your hotel.
