Since acquiring the Leonardo Royal Hotel Berlin Alexanderplatz four years ago, Art-Invest Real Estate has improved revenues, profit and value at the 346-bedroom property.
Art-Invest – a German developer, asset manager and investor – has roughly €12.5 billion in assets under management with around 120 properties across Germany, the UK, Sweden and Austria. The business recently sold the Pullman Cologne Hotel to Pandox. Fattal Hotel Group agreed a €57.4m sale-and-leaseback deal on the Leonardo Royal Hotel Berlin Alexanderplatz with Art-Invest in 2020.
Constantin Hoss, Art-Invest’s head of asset management hotels, says the disrupted market “offered us the opportunity to acquire the property at favourable terms... to enhance the value of the asset and the operation thereafter, and for Leonardo it represented an opportunity to generate the needed liquidity at this time, but at the same time secure the location and the operation of the hotel for another 25 years”.
A 1950s former office building, the property had been acquired and converted into a hotel by Fattal in 2009. Hoss describes it as a quality asset in a strategic location with good transport links and “a lot of demand generators” nearby.
Opportunities in the Berlin hotel market
He explains that the hotels pipeline in Berlin at the time was “rather low” compared to other German cities, despite 2019 being a particularly successful year for the city's tourism, so Art-Invest saw an opportunity to benefit from this post-pandemic. The aim, he says, was to use anti-cyclical timing, a new lease agreement and a renovation programme to create a core investment that could then be returned to market.
Art-Invest took ownership of the property in September 2020, entering a new lease agreement that sees the hotel continue to be operated by Fattal under the Leonardo Royal brand. “At this time nobody knew how the pandemic would be developing, so we tried to do our very best to reflect the anticipated recovery of the market in the lease agreement,” says Hoss.
Under the terms of the 25-year agreement, Fattal did not pay any rent until the end of 2020. From 2021, Fattal was set to pay rent of 60% of its net operational profit (NOP) and a fixed rent of €2.9 million or 24% of revenue (whichever was higher) from 2022, and from 2023 a fixed rent of €3 million or 24% of revenue (whichever was higher).
Refurbishment and challenges
Naturally, Covid-19 presented challenges – given the hotel’s NOP in 2021 was negative, income that year was zero. But the post-pandemic ramp-up from 2022 was “much stronger than we planned”, says Hoss, with subsequent turnover rent consistently higher than planned.
Budgeting for the renovation was also a challenge, given the circumstances, he says: “There were separate budgets for each part of the hotel, for the rooms and for the public areas, and when planning the renovation, some of the budgets were reallocated, so we didn’t stick to our original plan.”
Art-Invest renovates properties “together with the tenant”, says Hoss, which saw both parties nominate a designer for the project. Art-Invest’s nomination, Designer’s House, won out, although Hoss says the designer managed to retain the “typical Leonardo feeling” in the finished product.
The project saw changes to fixtures, furniture and equipment (FF&E), with warmer colours and more greenery and daylight introduced into the lobby. The 11 meeting rooms and ballroom received some soft refurbishment, while the food and beverage (F&B) areas got a new design to create a space that could compete with other offerings in the area.
Overall, roughly €5 million was invested into renovating the property – €4 million front of house, €1 million back of house – a renovation which was completed in 2022.
Translating KPI improvement into value enhancement
Between 2019 and 2024, the hotel saw average daily rate (ADR) increase roughly 33%, despite occupancy lagging slightly behind 2019 levels. While this was in part due to market conditions, Hoss says operational KPIs have surpassed inflation, with both top- and bottom-line improvement.
Gross operating profit per available room (GOPPAR) improved by almost 25% and revenue generating index (RGI) by roughly 7%. “We were not only able to improve revenues, but also profit for the operator,” says Hoss.
“We have seen very strong improvement in operational KPIs, and at the end they translated for us into an improvement in market value,” with the hotel’s market value improved 21% between 2020 and 2024.
The project was named runner-up for this year’s HAMA Award by the Hospitality Asset Managers Association (HAMA).
All those quoted in this article appeared on stage at IHIF EMEA, held in Berlin, Germany, between 31 March – 2 April 2025, in a session called: Asset management excellence: HAMA Europe award-winning case studies.