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Hotel Operating Lease Agreement

In order to develop the HOTEL owner`s EBITDA, it is necessary to adjust the agreed credit rental rate for annual reserves for organisational costs and other expenses incurred by the hotel investor/property owner (tax, insurance, etc.). Based on reports from the main hotel organisations in Europe (Germany, Austria, Switzerland, Italy, the United Kingdom, Spain and France), EBITDA averages between 14.5% and 21.5% of the hotel`s total turnover for hotel owners and investors. Hotels belonging to international chains can deviate significantly from these values. When executing a rental contract, the hotel operator actually owns the hotel business and takes care of all the risks associated with the operation of the hotel. The hotel operator is responsible for obtaining all permissions, licenses and authorizations for the legal operation of the hotel, including all restaurants, bars or spa facilities on the site. The hotel operator is also the employer of all employees who work at the hotel and are duly responsible for recruiting and paying their wages. Hotels, residences and hotel properties are distinguished by their heterogeneity; diversity can be explained not only by differences in category, number of rooms, locations or amenities, but also by a wide range of ways to manage their working relationship by the hotel owner and hotel operator. The hotel operator contract is particularly important for investments in hotel real estate, as it determines the distribution of risk between the owner and the hotel operator. The operating contract used for a hotel determines the form of the investment in that property. In the national and international hotel landscape, two main types of operating contracts are still in place: leases and management contracts. A hotel management company is a company specializing in hotel management. This company will manage the hotel for the owner of the property in exchange for a previously agreed management fee, while all income and expenses will be deducted from the owner of the property.

That is to say, the management company is none other than the long and professional arm of the real estate owner, which acts transparently and with minimal economic and financial risks. Given that third-party operators have gained a foothold in Europe over the past ten years, they have provided additional flexibility to the investment scene of fixed-rate hotels, also committing to leases and starting their properties through franchise agreements with one of the major hotel companies. In this context, the parties will develop an administrative arrangement that will impose most of the legal and commercial liability on the owner.

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