Few questions shape the long-term success of a lease as much as the level of the rent. It has to balance two interests: the owner wants a reasonable return, and the operator has to be able to run the business profitably once the rent is paid. Miss that balance, and both sides lose in the end.
This article sets out what a sustainable rent depends on — and why blanket percentages lead you astray.
Why there is no single figure
Fixed percentages circulate again and again — “so many percent of turnover”. Such rules of thumb are dangerous because they ignore the decisive point: two properties with the same turnover can produce very different earnings, depending on cost structure, location and operating model. A rent that one property can bear will ruin another.
The basic logic: rent follows earnings
A sustainable rent is not derived from turnover but from the sustainably achievable operating result. Put simply: what is left at the operating level, and how much of that can be taken as rent without leaving the operator too little room to run and reinvest in the business? This derivation — from earnings to rent — is at the heart of every sound approach to setting a lease. It is closely tied to the valuation of the property.
What affects a sustainable rent
- Earning power and cost structure: the sustainable operating result, not turnover.
- Location and market stability: predictable demand supports a higher rent than a volatile location.
- Condition and capital needs: upcoming investment lowers the rent the property can bear.
- Contract structure: term, maintenance obligations and securities act directly on the appropriate level.
- Operator and concept: an experienced operator with the right concept gets more out of the same property.
Fixed, turnover-based or hybrid rent
Beyond the level, the structure matters. A fixed rent gives the owner maximum predictability. A turnover- or profit-based rent shares opportunity and risk and moves with the business. Often a hybrid — a secured base plus a variable share — is the fair middle ground. Which structure fits depends on the property, the state of the market and how much security each side needs.
The most common mistake
The costliest mistake is a rent set too high — attractive on paper, but more than the operator can carry. The result is late payment, deferred investment and, in the end, a weakened property — a poor deal for both sides. A rent set realistically, one the operator can sustain over time, usually earns the owner more.
How NOWA assesses the rent
We derive the sustainable rent from your property’s actual earnings, factor in location, condition and contract structure, and test it against what sound operators in the market can genuinely afford to pay. The result is a rent that holds — for both sides and across the term.
Frequently asked questions
What percentage of turnover should the hotel rent be?
Fixed percentages of turnover are misleading. A sustainable rent is derived from the sustainably achievable operating result, not from turnover — otherwise it can be bearable for one property and ruinous for another.
Fixed rent or turnover-based rent?
A fixed rent gives maximum predictability; a turnover- or profit-based rent shares opportunity and risk. Often a hybrid of a secured base and a variable share is the fair middle ground.
What happens if the rent is too high?
It overburdens the operator and leads to late payment, deferred investment and a weakened property — a poor deal for both sides. A realistically measured rent usually earns more.
General professional guidance, not tax, legal or valuation advice for an individual case. The factors and methods mentioned are for orientation; the outcome always depends on the specific property, its earnings and current market conditions. Contract and tax matters require qualified advice.