Poland’s hotel investment market is undergoing constant growth. Although Poland is still behind some European countries, potential investors and international hotel groups are watching the market with interest and seeking out the best locations for both business- and tourism-oriented investment opportunities.

With new conference venues, both in the capital and in regional cities, and an increasing stream of tourists, Poland has considerable potential for further growth. Between 2006 and 2015 the number of hotel night stays increased by 86 percent. Boutique hotels are another new and noticeable trend.

Variety of investment models

At present there is no typical investment model for the Polish market. Transactions vary from share deals to asset acquisitions. However, there is greater demand for transactions involving lease agreements than the simple management agreement model. This is because some investors prefer not to be involved in the day-to-day operation of hotels. The acquisition of a hotel with a guaranteed long-term lease provides a stable income with significantly less obligations on the part of the owner.

A new model that is popular in other jurisdictions is a variation of the long-term lease model, but where the subject of the lease agreement is an enterprise instead of real estate. This model allows for the simplified transfer of the asset and operations from the owner to investors interested in the long-term operation of a hotel. This structure also enables the automatic assignment of hotel personnel to the tenant. We expect such structure to become more popular on the local market.

The perspective of Polish law

Hotel-related transactions are different to office and retail transactions and create new challenges for advisors. The acquisition of a hotel is a complex undertaking, and includes a significant number of employees to be taken over and contracts to be assigned. In particular the parties will need to assign a management agreement with an international hotel brand, if one has been contracted to manage the hotel. International brands are particularly sensitive to problems with a hotel’s day-to-day operations, as finances and reputation may be at risk.

As most administrative permits in Poland are not transferrable it is crucial to structure a hotel transaction with great precision, especially regarding the time schedule and sequence of actions. This applies in particular to the following hotel operation permits: permit for the sale of alcohol, hotel permit (so-called categorisation decision), and the decision on the registration of a hotel as a food and beverage sale point. A hotel may not operate without these permits. Therefore, advisors must structure the transaction in such a way that ensures there is no interval between the cancellation of the previous permits and obtaining new ones.