Since the outbreak of the pandemic, the Swiss hospitality market has not only recovered but gained further momentum. This resurgence is evident from the numerous new hotel projects and re-brandings making headlines across the country. At CBRE Switzerland, we continue to be involved in operator selection processes for both lease agreements as well as hotel management contracts, recently successfully completing a project for a historic luxury hotel in Davos.
From these experiences, we can extract key insights into how the requirements of hotel owners have evolved in today's market:
• Sustainable Rental Levels and Financial Stability: Maximizing rental income and cash flow remains a priority for owners. However, ensuring these rents / projected cash-flows are sustainable in the long run is even more crucial. Owners are now placing a strong emphasis on guarantees and the financial robustness of operators to safeguard their investments against future uncertainties.
• Strategic Vision and Operational Expertise: While it has long been a given with Hotel Management Agreements (HMAs), even with lease agreements, owners are keen to understand the strategic vision of potential operators. They seek operators who not only bring substantial experience but also have a clear strategy for driving success. This involves scrutinizing the operator's approach to market positioning, customer acquisition, and operational excellence.
• Brand Value and Market Presence: The value added by a brand is now a critical consideration. Owners are looking at the brand's track record in similar locations, the size of its portfolio, and its overall market presence. With many new brands and large groups offering multiple options, it can be overwhelming for owners. Therefore, the distribution power of the brand and its reach in various countries, along with the loyalty of its members, are significant factors in decision-making.
• Enhanced Reporting and Performance Monitoring: There is a heightened demand for detailed reporting to understand profitability levels better and to monitor operator performance closely. This allows owners to assess their risk exposure continually and make informed decisions to protect their investments. The increased reporting requirements now often also include energy performance and consumption data to comply with ESG reporting requirements.
• Operator Investment and Guarantees: There is a general willingness among owners to invest, but they expect operators to have "skin in the game." This could be through financial contributions or performance guarantees, ensuring operators are equally committed to the success of the property.
Conclusion: The post-pandemic market has become increasingly competitive, with owners becoming more demanding and sophisticated in their selection of operators. By focusing on sustainability, strategic alignment, brand value, comprehensive reporting, and shared investment risks, owners aim to forge partnerships that promise long-term success and stability.
