Hotel leasing is rapidly transforming India’s hospitality sector, offering a win-win model that balances risk and reward for all stakeholders. With over 307 hotels already under lease and revenue-sharing arrangements, this trend is redefining how hotels are developed, operated and monetised. Whether it’s operational properties, under-construction projects or greenfield ventures, hotel leasing offers unparalleled flexibility, making it a viable choice for both hotel owners and investors.
In particular, for hotel developers or owners with limited bandwidth or those seeking a low to moderate-risk model, hotel leasing provides an ideal pathway to ownership. This model enables hotel ownership without being burdened by the complexities of day-to-day operations. By partnering with experienced operators, developers can enjoy a steady income and long-term asset appreciation while avoiding the intricacies of management.
A milestone year for hotel leasing
In 2024, NOESIS, India’s leading hospitality advisory firm, spearheaded 18 hotel lease deals, including a landmark transaction for a 300-room hotel at Mumbai International Airport—one of the largest of its kind. This underscores how leasing has become a preferred approach, offering robust opportunities in the Indian hospitality space.
Why leasing works for hotel owners
For hotel owners, leasing delivers a host of benefits that simplify operations while certainty in returns:
1. Reliable Income: Enjoy steady cash flow through fixed rent, minimum assured rent or revenue-sharing arrangements.
2. No Operational Hassles: Operators manage maintenance, renovations, and even FF&E (Furniture, Fixtures, and Equipment) reserves, freeing owners from day-to-day burdens.
3. Compliance Simplified: Statutory compliance, like trade license renewals, is handled by lessee/operator.
4. Easy Financing: Predictable cash flows from lease agreements make it easier to secure low-cost funding through lease rental discounting.
5. Long-Term Asset Value: Owners retain real estate value while leveraging stress-free operations.
6. Cost-Free Expertise: Operators offer technical services and procure materials at preferential rates.
7. Pre-Opening Covered: Operators handle pre-opening costs, training and even working capital
expenses.
8. Crisis Resilience: During disruptions like pandemics, operators bear upkeep and restart costs.
9. Exit Opportunities: Portfolio of hotel leased assets can be monetized through SME REITs (Real
Estate Investment Trusts), creating lucrative exit options.
Popular hotel leasing models
Hotel leasing comes in flexible formats to suit various risk appetites and investment goals:
Fixed Lease: Guarantees stable returns with annual rent escalations, perfect for risk-averse
investors.
Revenue Share Lease: Links earnings to hotel performance, offering higher rewards for risk-tolerant investors.
Hybrid Lease: Combines fixed rent with revenue share, offering stability with growth potential.
Guaranteed Minimum Lease: Ensures a percentage of revenue or minimum rent, whichever
is higher, balancing risk and reward.
How leasing agreements work
Roles and responsibilities in leasing agreements vary depending on the stage of the project:
Structure/Shell Lease: Owners provide the building; operators handle interiors and
operations.
Fitted Lease: Owners furnish interiors; operator manage the remaining setup and operations.
Fully Fitted Lease: Owners deliver a completed property; operator focus on launching and
running the hotel.
What owners should keep in mind?
For a successful leasing arrangement, hotel owners should:
Evaluate the Operator: Check their financial stability and track record.
Negotiate Smartly: Base rentals on comprehensive feasibility studies and market conditions.
Define Key Clauses: Include provisions for FF&E reserves, lock-in periods and clear exit
strategies.
The future of hotel leasing
As India’s hospitality landscape evolves, hotel leasing is emerging as a cornerstone of modern
development. It offers a streamlined path to steady income, operational ease and long-term asset
appreciation. For developers or owners with limited bandwidth, leasing provides the perfect model to own a hotel while minimising day-to-day operational challenges.
At the forefront of this change is NOESIS, which continues to drive innovative leasing deals that create sustainable value for investors and operators alike. With its resilience, profitability and collaborative nature, hotel leasing is set to power the next phase of growth in India’s hospitality sector.
