In our analysis of Invesco Real Estate’s sale of the Andaz Amsterdam Prinsengracht to a consortium led by First Sponsor Group, we identified the transaction’s most important technical feature: the property is operated by Hyatt under a long-term lease rather than a conventional hotel management agreement.
The buyer therefore did not simply acquire a luxury hotel in central Amsterdam. It acquired a hospitality property generating a contractually defined rental income stream supported by a corporate operator, combined with the asset’s long-term real estate appreciation potential.
The transaction raises a question to which the Italian market is currently unable to provide a complete, public and verifiable answer:
How many Italian hotels are leased to international hotel groups or operators, and how do their returns compare, on a like-for-like basis, with properties operated under management agreements or franchise structures?
There is no answer because no reliable market map exists.
That is precisely why one needs to be built.
The missing data point in the Italian hotel market
The available statistics describe the growing presence of hotel brands, but stop one step short of the information that matters most to investors.
We know that chain and brand penetration is continuing to increase. We know that Italy hosts a growing number of international hotel brands and that a significant share of new openings involves the conversion of independent hotels into franchise, soft-brand or global distribution platforms.
We also know that, when measured by the number of properties rather than by room count, chain penetration remains relatively limited. The Italian hospitality market continues to be characterised by family ownership, substantial real estate wealth and businesses that are often less developed from a financial, managerial and contractual perspective — a subject regularly examined in the analyses published on RobertoNecci.it.
What these surveys do not explain is how hotels carrying international brands are actually contracted and operated.
Brand penetration and contractual structure are not the same thing.
A Marriott hotel may be:
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operated directly by the owner under a franchise agreement;
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operated by an independent company using the Marriott brand;
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managed by the brand through a hotel management agreement;
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leased to an operating company belonging to or affiliated with the group;
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operated by a local special-purpose vehicle without a direct parent-company guarantee.
The sign above the entrance may be identical. The financial and economic profile of the investment is entirely different.
A franchised hotel, a managed hotel and a leased hotel are fundamentally different assets in terms of risk allocation, income visibility, bankability, return potential and eligible buyer universe.
The same brand does not necessarily represent the same risk.
Without knowing the underlying contractual structure, the market cannot segment assets properly. And assets that cannot be segmented cannot be priced efficiently.
The first distinction: the brand is not necessarily the tenant
One of the most common misconceptions is that a hotel displaying an international brand is automatically managed or leased by the company that owns that brand.
In practice, the entity paying the rent may be:
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the Italian subsidiary directly controlled by the international hotel group;
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a regional operating company within the group;
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a master franchisee;
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an independent hotel operator;
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a white-label operator using the brand under a franchise agreement;
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a special-purpose vehicle incorporated solely to operate that particular property.
This is not a merely formal distinction. It lies at the heart of the tenant’s credit assessment.
A lease signed by a well-capitalised operating company, supported by a parent-company guarantee and embedded within a diversified portfolio, does not have the same value as a lease signed by a thinly capitalised special-purpose vehicle with no meaningful assets and whose ability to pay rent depends entirely on the performance of a single hotel.
In the first case, the owner may benefit from an income stream that can, within certain limits, be treated as corporate-backed rental income.
In the second, the owner continues to bear a substantial degree of indirect operating risk, despite formally having entered into a lease.
A lease does not become “corporate” simply because an international brand appears on the building. It becomes corporate because of the quality of the tenant, the strength of the guarantees, the tenant’s capital structure and its ability to continue paying rent during a downturn.
Lease, management and franchise: three models, three risk allocations
The distinction is not academic. It has direct economic consequences.
Lease
Under a lease, the tenant assumes the principal risks associated with the hotel operation and pays rent to the property owner.
The rent may be:
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entirely fixed;
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variable as a percentage of revenue;
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hybrid, with a guaranteed minimum plus a turnover component;
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stepped during the hotel’s ramp-up period;
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indexed to inflation or another contractual benchmark.
Occupancy, ADR, RevPAR, payroll, energy costs, distribution expenses and operating inefficiencies are primarily borne by the tenant.
The owner gives up part of the operational upside in return for greater income predictability.
Hotel management agreement
Under a hotel management agreement, the operator manages the hotel on behalf of the owner.
The principal economic risk remains with the owner, while the brand or operator typically receives:
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a base fee calculated on revenue;
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an incentive fee linked to GOP or another profitability measure;
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additional charges for marketing, reservations, loyalty programmes and centralised services.
It would be too simplistic to say that all risk remains with the owner. Some agreements include performance tests, owner-priority mechanisms, cure rights, operator contributions, limited guarantees or early-termination provisions.
Nevertheless, the core principle remains unchanged: under a management structure, the owner is significantly more exposed to volatility in the hotel’s operating performance.
Franchise
Under a franchise agreement, the owner or a third-party operator manages the business while using the brand, distribution systems and operating standards of the hotel group.
The owner generally retains both the operating risk and the economic upside, while paying:
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franchise fees;
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reservation charges;
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marketing contributions;
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loyalty programme fees;
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costs associated with compliance with brand standards;
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fees payable to any third-party operator.
Franchising can therefore represent an intermediate solution. It allows the owner to benefit from the brand’s commercial strength without transferring full operational control to the hotel group, but it requires experienced management and disciplined financial oversight.
Why the distinction has a direct financial value
A significant proportion of investors active in the upper-upscale and luxury segments favour management agreements and franchise structures because these models allow them to participate directly in GOP growth and the operational repositioning of the asset.
This can be a rational approach, particularly when:
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the destination is growing;
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the property has recently been refurbished;
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its commercial positioning can be improved;
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the owner has strong asset-management capabilities;
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the operator is subject to effective performance tests;
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there is a credible plan to increase ADR, occupancy and ancillary revenue.
But it is a strategic choice, not a universal rule.
Greater upside also means greater exposure to volatility.
A hotel operated under a management agreement is not automatically less financeable, but it requires a more complex assessment of projected cash flows, operator quality, fee structures and the owner’s ability to absorb periods of underperformance.
By contrast, a lease backed by a strong corporate counterparty may be easier to underwrite for:
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core and core-plus funds;
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insurance companies;
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pension funds;
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income-oriented institutional investors;
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property-focused family offices;
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long-term Asian capital;
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lenders prioritising debt-service visibility.
These investors generally favour contractually secured rental income over the volatility of a hotel operating statement.
The consequence is significant: the contractual structure affects not only the property’s current return, but also the composition of the buyer universe and the value that may be achieved upon disposal.
The relevant question is therefore not whether leasing is inherently better than management.
The correct question is:
At what stage in the asset’s life cycle does it make sense to retain operating risk, and when is it more efficient to convert operating performance into a stabilised rental income stream?
This is precisely the area in which Investhotel Capital Partners operates when structuring, repositioning and negotiating hotel transactions, combining transactional expertise with the direct operational experience developed through Necci Hotels.
Negotiating a sustainable rent requires more than an understanding of real estate values. It requires a clear view of how much rent the hotel’s profit and loss account can genuinely support without compromising maintenance, service quality, capital expenditure or business continuity.
The market map Italy does not have
A serious survey of Italian hotels operated under lease structures should record, on a property-by-property basis, at least the following information:
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Hotel brand and the corporate group to which it belongs
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Identity of the actual tenant
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Corporate relationship between the tenant, the operator and the brand owner
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Legal nature of the agreement: property lease, business lease, lease of a business division or hybrid structure
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Initial term and remaining term
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Break options, termination rights and default provisions
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Rent structure: fixed, variable or hybrid
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Guaranteed minimum rent and reconciliation mechanisms
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Rent per room and rent-to-revenue ratio
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Corporate, bank or parent-company guarantees
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Indexation mechanisms
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Allocation of capital expenditure and major maintenance obligations
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Furniture reserve or replacement-fund provisions
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Obligations to comply with brand standards
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Ancillary income-producing components: retail, offices, parking, food and beverage or conference facilities
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Change-of-control provisions and transferability of the agreement
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Any financial covenants or performance tests connected to the lease
Among these variables, four are particularly important:
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the identity and credit strength of the tenant;
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the presence of a parent-company guarantee;
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the allocation of capital expenditure;
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the effective remaining term after taking break options into account.
A high rent does not necessarily create value if the agreement requires the owner to fund repeated capital expenditure, allows the tenant to terminate early or is supported only by a special-purpose company with no meaningful assets.
Headline rent is not the same as the owner’s net return.
The three principal categories of hotel leases
A preliminary examination suggests that Italian hotel leases may be grouped into three recurring categories.
1. Industrial economy and midscale operators
These are operators that have built their European expansion through leases because their business models depend on:
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direct control over operations;
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standardised procedures;
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high product replicability;
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tightly controlled payroll;
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limited service complexity;
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strict real estate selection criteria.
For these companies, leasing is not an occasional alternative. It is the engine of their expansion.
They also tend to be particularly disciplined in their assessment of property suitability, rent affordability and technical building requirements.
2. Legacy full-service portfolios
This category includes large urban hotels and portfolios originating from former domestic chains, corporate acquisitions or contracts entered into before the arrival of the brand currently displayed.
In these situations, the lease relationship may predate the present brand.
The agreements are often long term and may reflect economic conditions negotiated during a different market cycle.
Their analysis requires particular attention to:
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indexation;
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deferred capital expenditure;
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maintenance obligations;
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renewal rights;
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long-term rent sustainability;
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guarantees originally issued by companies that may since have been reorganised.
3. Selective leases in strategic locations
This category includes hotel groups whose preferred expansion model is management or franchising, but which are prepared to accept leases for properties considered strategically important.
Rome, Milan, Venice, Florence and selected high-barrier leisure destinations may justify exceptions to a group’s standard development strategy.
This is the segment in which the property owner may hold the greatest negotiating leverage, particularly when:
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the location is difficult to replicate;
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the hotel has sufficient scale;
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the asset is aligned with the brand’s positioning;
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several operators are interested;
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the property is already authorised and ready for conversion.
Quantifying these three categories by property count, room count, class, location, rent per key and remaining lease term would represent a significant improvement in the transparency of the Italian market.
The benchmark needed to compare lease, management and franchise structures
Mapping the market would not, by itself, be sufficient.
Once the leased properties have been identified, they should be compared with a homogeneous sample of hotels operated under management agreements and franchise structures.
The comparison should be controlled for:
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hotel category;
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city or destination;
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room count;
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demand profile;
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market positioning;
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food and beverage and ancillary facilities;
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refurbishment year;
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capital intensity;
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observation period.
At least five measures should be examined.
1. The owner’s current net return
For leased properties, the calculation should consider rent net of:
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taxes;
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insurance;
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maintenance;
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capital expenditure;
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non-recoverable costs;
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rent-free periods;
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renegotiation or litigation costs.
For managed and franchised hotels, the analysis should consider GOP or available cash flow after:
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brand fees;
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management fees;
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loyalty and reservation charges;
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marketing fees;
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furniture reserves;
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capital expenditure;
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central costs;
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financing costs, where relevant to the comparison.
2. Cash-flow volatility
The 2020-2021 period remains the most significant natural stress test in the recent history of the hospitality industry.
The analysis should determine:
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which rents were paid in full;
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which were suspended or renegotiated;
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which operators requested reductions;
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which owners were required to absorb operating losses directly;
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which corporate guarantees proved effective in practice.
A lease that is renegotiated at the first sign of market stress does not carry the same risk profile as genuinely protected rental income.
3. Capital expenditure borne by the owner
Two contracts generating the same rent may produce entirely different returns if one allocates capital expenditure to the tenant while the other places most of that burden on the owner.
Returns must therefore be calculated after the investment required to keep the hotel competitive and compliant with brand standards.
4. Exit value and transaction multiples
Where comparable evidence is available, the analysis should examine:
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exit yields;
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rent multiples;
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EBITDA multiples;
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price per room;
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premiums or discounts linked to the remaining term;
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the value attributed to corporate guarantees;
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the impact of break options;
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the difference between vacant-possession and investment sales.
5. Risk-adjusted return
The working hypothesis to be tested is that leases may generate lower nominal returns but higher risk-adjusted returns, while management and franchise structures become superior once the hotel exceeds certain thresholds of:
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RevPAR;
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GOP margin;
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operational quality;
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demand stability;
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owner oversight capability.
Identifying these thresholds numerically, by category and destination, would provide owners with an objective decision-making framework.
The discussion would no longer be reduced to “I prefer a lease” or “management delivers higher returns”.
It would become:
At these levels of RevPAR, operating margin, volatility and capital expenditure, which contractual structure creates the greatest net value for the invested capital?
Why the research has never been completed
There are three principal reasons.
The agreements are confidential
Commercial terms represent one of the most important sources of negotiating leverage for hotel groups and operators.
Public disclosure of rents, guarantees and contractual concessions would weaken an operator’s position in subsequent negotiations.
The data must therefore be reconstructed through:
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tenant-company financial statements;
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notes to the accounts;
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company registry filings;
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corporate documents;
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real estate fund prospectuses;
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listed-company disclosures;
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insolvency proceedings;
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transaction intelligence;
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interviews and direct contributions from market participants.
The research requires multiple disciplines
Analysing a hotel company’s financial statements, interpreting an indexation clause, assessing a parent-company guarantee and determining the rent that a hotel can sustainably support are separate professional disciplines.
The work must integrate:
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financial analysis;
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real estate valuation;
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hotel operating expertise;
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contractual knowledge;
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management control;
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corporate intelligence;
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direct operational experience.
This multidisciplinary approach is the basis of Hotel Management Group, whose activities may also involve commercial and distribution analysis through Hotel Marketing Lab, executive recruitment through Vertex Executive Search and specialist training through Roberto Necci Academy.
There is no natural sponsor
Hotel groups have no incentive to make rental terms transparent.
Individual owners do not have the scale required to finance a national research project.
International advisers tend to publish data on investment volumes, transaction activity, development pipelines and new openings. Contractual structures are harder to identify, less easily communicated and frequently treated as proprietary information.
The result is a market in which each owner negotiates largely in isolation, while the professional counterparty benefits from knowledge accumulated across dozens or even hundreds of agreements.
What greater transparency would change
For property owners
A reliable benchmark would allow owners to understand:
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average rent per room;
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average rent-to-revenue ratio;
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standard lease terms;
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typical guarantee packages;
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normal capital-expenditure allocations;
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terms agreed for comparable properties;
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premiums achieved by strategic locations.
Today, many owners negotiate without knowing what has been achieved by genuinely comparable hotels.
This is one of the most significant information asymmetries in the sector.
For international investors
A structured market map would make it possible to segment Italy by contractual risk.
A core investor could immediately identify:
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properties with guaranteed rent;
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hotels occupied by investment-grade or equivalent counterparties;
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contracts with long remaining terms;
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leases without break options;
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assets capable of being aggregated into portfolios;
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situations in which apparent rental income still conceals substantial operating risk.
When income-producing hospitality assets cannot be identified, part of the institutional capital market is unable even to enter the investment process.
For lenders
The benchmark would support a more accurate assessment of:
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tenant creditworthiness;
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debt-service coverage;
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rent sustainability;
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renegotiation risk;
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the contract’s value in a sale;
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the effect of lease expiry on terminal value.
For the transaction market
A structured database would make it possible to create homogeneous portfolios.
Assets cannot be aggregated until they have first been identified, classified and compared.
The consolidation of the Italian hospitality market does not depend solely on the availability of capital. It also depends on the quality of the information that allows capital to identify, compare and price investment opportunities.
The mapping project is now open
InvestimentiAlberghieri.it is beginning the construction of a database dedicated to Italian hotels operated under property leases, business leases, leases of business divisions and hybrid structures.
The methodology will follow the principles of deal journalism:
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verifiable data;
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identified sources;
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a clear distinction between confirmed information and working assumptions;
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no estimate presented as an established finding;
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publication exclusively in aggregated form;
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strict protection of confidential information.
Contributions are invited from:
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hotel property owners;
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family offices;
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investment funds and asset management companies;
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lending banks;
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hotel operators;
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asset managers;
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advisers;
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investors interested in income-producing hospitality assets.
Submissions may include, without disclosing the name of the hotel:
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city;
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category;
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room count;
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contractual structure;
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remaining term;
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rent structure;
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identity and nature of the tenant;
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presence of a corporate guarantee;
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capital-expenditure allocation;
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break options.
All information will be treated confidentially and used exclusively for aggregated analysis.
Contributors may receive early access to the principal findings of the benchmark before publication.
To contribute to the mapping project, negotiate a hotel lease or assess the sustainability of an existing rental structure, contact:
info@investimentialberghieri.it
Roberto Necci - r.necci@robertonecci.it
Sources for the market data referenced in this article include Mordor Intelligence for Italian brand-penetration and development-pipeline data; InvestimentiAlberghieri.it for analysis of chain penetration in the Italian market; and Missionline for coverage of institutional investors’ preferences across management, franchising and lease structures. The classification of tenant categories and the hypotheses concerning comparative returns constitute a preliminary analytical framework to be tested through the research. This article is provided for information purposes only and does not constitute financial advice or an invitation to invest.
