What investors are asking for from hotel brands

At this year’s International Hospitality Investment Forum (IHIF) in Berlin, leading hotel investors met in a closed Investor Council session to discuss the dynamically changing landscape of the hotel investment market. Their discussions revealed five key points that capture the developments and trends shaping the future of the sector.

1. Key Money and Flexible Management Agreements

The focus was on key money, i.e., the amounts offered by hotel chains to owners and developers to secure franchise or management contracts. Although this tool has traditionally been taken for granted, it has rarely been openly discussed – until recently.

Increased competition, especially for conversions rather than new developments, has made key money a strategic lever. More and more chains are mentioning it in their earnings reports, while investors are demanding more flexibility in deals.

In Europe, where ownership structures are more fragmented, investors often have greater bargaining power. In the US, where big brands dominate, key money remains a key tool for securing strategic partnerships. One investor commented:

“We said: ‘Keep the key money. We want a ten-year income guarantee.’ And when we decide to sell, that will help us a lot.”

Another investor pointed out:

“We prefer lower management fees than key money, because the latter is taxable. Lower fees are more in our interest.”

2. Luxury is moving towards franchise models

Traditionally, large hotel chains directly controlled their luxury hotels to maintain consistency in quality and brand image. However, the difficulty of attracting and retaining staff, especially in luxury properties, is leading more chains to opt for franchise agreements and partnerships with white label operators.

One of the investors said:

“It’s already happening. Marriott’s W Hotels operates as a franchise, while Hilton’s Conrad is following the same path. It’s an inevitable trend for publicly traded companies, which need to demonstrate net income growth and portfolio growth.”

Another investor said that the difficulty of finding staff is global:

“We recently bought a hotel in Japan, but we are having difficulty finding staff. In a few years, we will probably turn to the franchise solution. And we’re talking about a hotel that costs $1,200–$1,400 per night.”

White label operators offer greater control over costs and guarantee professional asset management. Meanwhile, independent luxury brands like Four Seasons and Aman Resorts, which are not subject to shareholder pressure, maintain tight control over the management of their properties.

3. Luxury brand mashups

The growing demand for exclusive and specialized experiences is leading luxury hotel chains to strategically partner with brands outside of hospitality. One example is Sensei, which offers science-based wellness products, partnering with Four Seasons to create a luxury retreat in Hawaii.

Examples of luxury hotel partnerships with fashion brands include:

• The Beverly Hills Hotel with Dior
• Belmond with Dior
• One&Only Aesthesis, Greece (photo), with Balmain
• Gurney’s Montauk Resort & Seawater Spa, New York, with Dolce & Gabbana
• Hotel Du Cap-Eden Roc, Antibes, with Lacoste

In the branded residences sector, the market is growing rapidly, with developers capitalizing on both the glamour of hotel brands (Four Seasons, St. Regis) and the luxury of fashion and the automotive industry (Missoni, Fendi, Armani, Bulgari, Bentley, Aston Martin, Porsche).

As one investor commented:

“We didn’t sell faster or earlier, but the profit margins were 20-25% higher for the same product.”

4. Technology as a deal enabler

The adoption of modern, fully integrated technology solutions with real-time data is proving critical, not only for hotel operations but also for strategic acquisitions.

“A single cloud-based system offers all the necessary data for valuations, acquisitions, and sales, in real time,” noted one investor. In contrast, the existence of multiple, unconnected platforms requires significant time, resources, and human labor to collect data.

5. Opportunities in distressed assets and refinancings

Economic uncertainty and market pressures are creating an environment that, according to investors, will peak towards the end of 2025. One investor observed:

“The industry and the global economy are heading into difficult and volatile waters. For those of us with liquidity, this will be an excellent time to make investment moves.”

Many hotel units face the need to refinance within the year, which will put pressure on owners: “Many owners are not ready for this. So for those interested in closing deals, the environment is ideal, despite the volume of private debt.”

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