How is a hotel rent set at review?

Normally by profits method: project the trade a competent operator would achieve, deduct realistic operating costs and an FF&E reserve to reach an adjusted profit, and take a share of that as rent. Comparable rents per room are used as a sense-check rather than a primary method.

Should I accept a pure turnover rent?

It can protect cash flow in weak years, but only if the base rent floor is modest and the turnover definitions are tight. A high floor with a percentage on top gives you the downside of a fixed rent and the upside cost of a turnover rent.

Who pays for brand-mandated refurbishment?

That depends on the lease and the franchise agreement read together. Where the lease repairing covenant and the brand standard conflict, the operator can end up funding works the landlord ultimately benefits from — worth resolving at renewal, not at exit.

Hotel Rent Review & Lease Renewal Surveyor

What drives value here

Occupancy, ADR and RevPAR against the competitive set, not the citywide average
Departmental profit and adjusted gross operating profit after a proper FF&E reserve
Brand or franchise fees, management fees and the cost of brand standards
Capital expenditure cycles and who carries the refurbishment obligation
Food and beverage, conference and leisure contribution as distinct profit centres
Turnover rent structures, base rent floors and audit provisions

Getting the trading assumptions right

A landlord's valuer will typically project stabilised trade and apply a percentage. Every element of that projection is arguable: the competitive set chosen, the ramp-up assumed, the payroll model, and whether the FF&E reserve reflects the real refurbishment cycle for the brand standard the hotel is held to.

Turnover and hybrid rents

Hybrid structures — a base rent plus a percentage of rooms and F&B revenue — are common, and the definitions decide the outcome. Whether commission-heavy OTA bookings are counted gross or net, and how conference and banqueting revenue is treated, can be worth more than the percentage itself.

Renewal and exit

At renewal, term length, refurbishment obligations and rent review pattern matter as much as the initial rent. On exit, dilapidations claims on hotels are large by nature, and the Section 18(1) cap and the landlord's likely re-positioning of the asset are central to controlling them.

Common questions

Guides for hotels

Talk it through

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Hotels — tenant-side surveying