Securing value in a high-rate market — how a use concept makes a hotel sellable

The starting point

Since interest rates rose, hotel transactions have become markedly harder: higher financing costs push down achievable prices, and properties with uncertain earnings can often only be marketed at a considerable discount — or not at all. A city hotel in the Rhine-Main region faced exactly this situation.

The idea

Instead of marketing the building as a classic hotel, a low-operation use concept with stable, publicly funded demand was implemented — use as social accommodation. The decisive difference from classic hospitality: remuneration is not based on market rent per square metre, but on a contract with the public sector — with high, predictable occupancy and low staffing and operating expense.

The result

This fundamentally changes the earnings picture. Achievable income corresponded to a gross yield of around 30 % on the purchase price — an exceptional figure that depends heavily on the concept, the contract term and occupancy, and should not be confused with a classic net yield. What mattered for the sale: a property with a stable, largely operation-independent cash flow could be sold, despite the high-rate market, at pre-rate-hike pricing.

The dual benefit

Such concepts solve two problems at once: the municipality gains urgently needed accommodation capacity at short notice, without having to build; the owner secures predictable income and the value of the property. A hard-to-sell hotel becomes a sought-after, socially useful asset.

What transfers

Not every hotel is suited to this specific concept, and the design depends on location, building and public need. The principle, however, transfers: in a high-rate market, saleability is decided not by location or fit-out alone, but by the stability and low operating burden of the income. Anyone holding a hotel with an uncertain outlook should examine whether an alternative use or operator concept can secure — or even increase — its value.