Hotel transactions are governed by numerous areas of law, each addressing different aspects of the process, including but not limited to:

• contract, real estate, and corporate law (which notably apply to the acquisition, sale, financing, and structuring of hotel ownership and operations);
• tax law (eg, corporate income tax (CIT), VAT, property taxes);
• planning and environmental law;
• licensing regulations;
• employment law;
• IP law; and
• data protection law.

The relevant sources include several applicable French Codes (eg, the Civil Code, the Commercial Code, the French Tax Code, the Labour Code) in addition to specific laws, regulations, norms, and case law.

Hotel transactions can be structured as share deals, asset deals (direct transfer of the real estate property and/or hotel business), or both simultaneously.

The deal structure depends on the circumstances ‒ notably:

• the acquisition scope (ie, the real estate property and/or all or part of the hotel business, as well as liabilities, employees, FF&E (furniture, fixtures and equipment), OS&E (operating supplies and equipment), etc);
• tax considerations (eg, registration duties, capital gain taxation);
• existing indebtedness and acquisition financing;
• due diligence considerations; and
• regulatory constraints and timing (eg, some transactions require clearing pre-emption rights).

The direct transfer of immovable property must be documented through notarised deed. This includes real estate asset deals and mortgage securities.

Sale and purchase agreements related to company shares (cessions de titres) and hotel businesses (cessions de fonds de commerce) do not require and are generally not concluded in notarised form.

It should be noted that transfers of business in France are subject to specific regulations codified in the French Commercial Code. Notably, for a short period of time, the seller and the purchaser of a hotel business are jointly liable for tax on the sale price of the business.

In general, hotel transactions and their terms ‒ notably, the purchase price ‒ are not public, except for the information that is available via:

• the land registry (eg, description of the plot, owner, acquisition date); or
• the commercial registry (eg, corporate information regarding the involved legal entities).

The sale of a business is subject to publicity, which allows the seller’s creditors to object to the sale price for a certain period of time.

Foreign investors are generally permitted to acquire hotels and real properties that are currently not considered, per se, as falling within the sensitive sector requiring prior clearance from the French authorities under French foreign direct investment regulations.

The French hotel industry includes a mix of privately owned and independent hotels, lease agreements, franchising agreements, management leases, and hotel management agreements.

The prevalence of certain models over others varies continuously, depending on the market segment, hotel category, size and location, brand (if any), and the involved owners and operators, which are each characterised by their own objectives, risk appetite, and legal, regulatory and/or tax constraints.

The key differences between these models, as further described in 3.2 Hotel Management Agreements, 3.3 Hotel Lease Agreements and 3.4 Hotel Franchising Agreements, relate to the:

• allocation of operational responsibilities and risks;
• benefit of the operational profits / burden of losses;
• operational control;
• ownership of the business;
• employment of the hotel staff; and
• remuneration.

Pursuant to hotel management agreements, owners of the hotel business (and, as the case may be, of the real estate property) grant a mandate to experienced and professional hotel operators to act in the name and on behalf of the owner as the exclusive manager of the hotel.

The ownership of the hotel business remains with the owner, which is fully exposed to operational risks and responsibilities, but also benefits from operational profits.

The hotel staff is usually employed by the owner. However, some operators choose to appoint and employ key personnel (such as the general manager of the hotel). Occasionally, operators employ the entire staff of the hotel and conclude what is usually referred to as a “reverse” hotel management agreement.

Managers usually receive:

• management fees (composed of a base fee, often calculated as a percentage of the turnover generated by the hotel, and an incentive fee, often calculated as a percentage of the profit), which are tied to the performance of the hotel in order to align the interests of the owner and the manager; and
• technical service fees, royalty fees, licence fees and/or centralised services fees, depending on the contractual scope of their services.

Hotel management agreements are generally not subject to a specific legal or regulatory framework in France. They are freely negotiated between the parties, often based on the templates provided by the operators. Operators sometimes require the simultaneous signature of other agreements (such as technical service agreements, licensing agreements, and/or centralised services agreements).

Aside from financial negotiations, key terms to consider typically relate to performance tests and their consequences, operational control, financial guarantees from the operator, the owner’s funding obligations to ensure compliance with hotel standards, and conditions and consequences of termination.

In the authors’ experience, hotel management agreements are often favoured by operators/managers, particularly for larger, upscale hotels and resorts.

Lease agreements are usually entered into between the owner of the real estate property (as lessor) and the operator (as lessee). The lessee owns the business. It pays the rent (ie, a minimum guaranteed rent, which is usually subject to indexation and/or a turnover-based variable rent) and does not receive any fees. It benefits from operational profits and bears all operating losses.

Except under limited circumstances, leases related to hotels are typically commercial leases, which are strictly governed by the French Commercial Code ‒ notably, with regard to their duration, renewal, termination, rent review, subletting, assignment provisions, service charges, and responsibility for works. Lessees are significantly protected by this specific regime and, in particular, benefit from security of tenure.

Commercial leases on hotels are also subject to specific provisions of the French Tourism Code, which specifically govern lessee works. Such leases are also subject to a particular methodology related to the calculation of rent upon renewal.

In the authors’ experience, lease agreements are often favoured by institutional and real estate investors looking for a stable income stream, with limited exposure to operational risk. As a result, such lessors also have a limited say in the day-to-day operations and management decisions of the hotel. Only a small number of international hotel chains are willing to operate as lessees in France.

It should also be noted that leases with a contractual term exceeding 12 years must be notarised and published with the land registry, thus triggering significant costs (eg, notary fees and 0.715% land registry fees assessed on the total amount of rent to be paid over the lease term).

Franchise agreements allow franchisees (ie, hotel operators) to benefit from the brand recognition, marketing support, training programmes, operational guidelines and resources, standardised procedures, and quality control measures provided by the franchiser (which is usually an established, well-known brand).

Franchisees pay franchisers initial franchise fees, ongoing royalties and marketing fees, which can be substantial. The operational risks are entirely borne by the franchisees, which must adhere to the franchiser’s standards and procedures. Franchisees may also be required to invest periodically in property improvements to meet brand standards, leading to additional costs.

Franchise agreements are often imposed by franchisers based on their own template agreements. In the authors’ experience, these agreements are usually not as thoroughly negotiable as lease or hotel management agreements. However, certain provisions do require specific attention in the negotiation process, including:

• pre-contractual disclosure;
• brand licensing;
• fees and financial obligations;
• termination terms;
• non-competition clauses; and
• dispute resolution mechanisms.

Hotel transactions are most commonly financed through bank financing, which offers competitive interest rates, but usually imposes restrictive covenants and security packages on borrowers (subject to regulations prohibiting financial assistance). These are often granted in the form of mortgage loans.

Depending on the ownership structure and scope of the financing, security interests such as pledges are sometimes granted on the hotel business (nantissement de fonds de commerce).

Financial leases (crédit-baux immobiliers) are also frequently used in the hotel industry.

Equity and (more rarely) mezzanine loans may also be used.

From a tax standpoint, the financing structure (of the target company or of the special purpose vehicle) must be carefully reviewed. Indeed, several interest deduction limitation rules apply to interest paid by a French company to related and non-related entities, as follows.

• Interest deduction limitation applying to loans granted by shareholders (Article 39-1-3° of the French Tax Code) ‒ the deduction of interest paid to direct shareholders is limited to an interest rate (including the accrued portion of any reimbursement premiums) equal to the annual average rate of floating rate loans granted by financial establishments for a minimum term of two years, as published on a quarterly basis by the French tax authorities (eg, 5.57% with regard to fiscal years closed on 31 December 2024) (the “maximum rate”).
• Interest rate limitation within related parties (Article 212-I(a) of the French Tax Code) – interest on related-party loans are deductible up to an amount calculated by reference to:
1. the maximum tax rate provided for by Article 39-1-3° of the French Tax Code (see preceding bullet); or
2. if higher, the rate that would be offered by non-related parties for a loan having similar terms (Article 212-I(a) of the French Tax Code).

It is sufficient evidence if the borrower discloses an appropriate credit offer issued by a third-party financial establishment on the date the related-party borrowing was subscribed.

• Anti-hybrid financing interest disallowance (Article 205 B of the French Tax Code) – the anti-hybrid rule prevents the deduction of interest expenses deriving from a hybrid mismatch. Hybrid mismatches are characterised as a mismatch between related companies. The mismatch may result either from a deduction of a payment without inclusion by the beneficiary or from a double deduction. Two enterprises are deemed to be related when a company holds, directly or indirectly, 50% of the share capital or voting rights or financial rights of another.

By way of exception, a hybrid mismatch may be used between unrelated companies in the case of a so-called “structured arrangement” (ie, arrangement considering the mismatch effect or designed to generate the mismatch).

• General limitation of net financial expenses (Article 212 bis of the French Tax Code – implementation of the Anti-Tax Avoidance Directive (“ATAD 1”) in domestic law) – this mechanism that limits the deduction of interest expenses applies to taxable income either at the company’s level or at the tax consolidated group’s level (if applicable). In the latter case, the above-mentioned rules apply on a consolidated basis (ie, at the level of the group).

The application of the limitation of the net financial expenses’ deduction depends on whether the company or the tax group is or is not “thinly capitalised” (ie, if the average amount of related-party debt is greater than 1.5 times its net equity).

For companies that are not thinly capitalised, net financial expenses are deductible only up to either 30% of an adjusted EBITDA or EUR3 million (whichever is greater). The adjusted EBITDA is determined based on the taxable income (before use of potential existing net operating losses) and adjusted with several items.

A 75% additional tax deductibility of the net financial expenses that are not deductible under the above-mentioned thresholds is still available if a company’s equity-to-assets ratio is higher than this ratio determined at the level of the consolidated group (in accounting terms).

Stricter tax deductibility limitation rules may apply (10% adjusted EBITDA or EUR1 million + no additional 75% tax deductibility) if the company is “thinly capitalised”.

Foreign financers are permitted to lend in France ‒ provided they comply with applicable regulations, including French banking monopoly rules, which impose licensing requirements (subject to certain exceptions).

It should be noted that the relevant security package depends on both the borrower and the lender (eg, “Dailly” assignments of receivables can only be granted to licensed credit institutions or financial institutions).

Tax Implications of a Share Deal/Asset Deal Related to Hotel Transactions

The tax implications of hotel transactions depend on the type of asset transferred and on the structure of the transactions. In general, a share deal is less taxed than an asset deal.

Asset deal

From the seller’s side and from a CIT perspective, the capital gain at the level of seller ‒ which is the difference between the sale price and the net book value of the assets transferred ‒ is taxable at the standard CIT rate of 25% (effective tax rate of 25.825% for corporate taxpayers with a turnover in excess of EUR7.63 million).

From the purchaser’s side, the purchaser is allowed to record on its balance sheet the acquired assets at their purchase price, and the subsequent amortisations will be calculated on this basis, thus resulting in a higher tax depreciation in the future. However, the intangible assets of the business as well as the lands are not amortisable.

From a transfer tax perspective, the purchaser is legally responsible for the payment of the registration duties. However, the parties may agree otherwise. The tax basis is equal to the sale price (or the fair market value, if higher) and the rate depends on the nature of the assets transferred, as follows.

• Going concern ‒ taxed at progressive rate up to 5% (the 5% rate applies to the portion of the sale price exceeding EUR200,000).
• Real estate assets ‒ in principle, the rate is approximately 5.8% (with a 0.6% surtax for office, commercial and warehouse assets located in Île de France if the disposal is not subject to VAT). As of 2025, this rate can be temporarily increased by the departments, leading to a maximum rate of approximately 6.3%. However, a reduced transfer tax rate of 0.715% could be applicable if the full price of the transaction is subject to VAT or if the real estate assets are acquired by a VATable person who commits to resell such assets within five years. An exemption regime may apply if the real estate assets are acquired by a VAT taxpayer who commits to carry out, within four years, work leading to the production of a new building or work that is necessary to complete an unfinished building (a fixed duty of EUR125 would be due).

From a VAT perspective, the VAT treatment applicable to a hotel transaction – as any sale of immovable property ‒ depends on several elements. Specifically, it depends on the parties and the nature of the element involved in the transaction (ie, whether it is non-developable land, land for future buildings, new buildings or old buildings). The transaction must be clearly defined, as the VAT treatment may affect the costs associated with the real estate investments. In any case, when the seller does not act as a VATable person, the sale should never be subject to VAT.

Where the hotel is sold to another VATable person who intends to continue operating the hotel, the TOGC (“transfer of a business as a going concern”) VAT relief should apply and no VAT should be due.

The transfer of real estate assets may trigger additional/specific taxes, such as:

• an additional real estate publicity fee (taxe de publicité foncière) amounting to 0.715% of the value of the properties; and
• a real estate security contribution (contribution de sécurité immobilière) amounting to 0.10% of the value of the properties.

Share Deal

From the seller’s side and from a CIT perspective, the capital gain at the level of the seller ‒ equal to the difference between the sale price and the net book value of the shares transferred – is, in principle, taxable at the standard CIT rate.

French tax law provides for a participation exemption regime applicable to the transfer of qualifying investments (ie, shares the long-term ownership of which is deemed to be beneficial to the company’s activity) held by a company for at least two years at the time of the transfer. According to this regime, the capital gain derived from a share transfer is tax exempt except for a lump sum of 12% of the gross gains, which is added back to the taxable income and taxed at the standard CIT rate (the effective taxation of the capital gain on the shares transferred is thus limited to approximately 3%).

The application of the participation exemption regime to the transfer of shares of companies that operate in the field of hotel activities depends on the composition of the company’s assets. The transfer of real estate companies (ie, companies for which the value of the real estate assets represents more than 50% of the total value of the company’s assets), which act as lessors of a hotel building that is operated by another company, are out of the scope of the participation exemption regime.

On the other hand, when the real estate assets are used by the company for its own hotel activity, the capital gain on shares of this company still benefits from the participation exemption regime. French administrative guidelines also permit this favourable regime to be maintained when the real estate assets used by the company in the course of its activities are not owned by the operating company whose shares are transferred, but by a subsidiary of such operating company.

In light of these principles, companies that operate hotel activities will – in most cases – not be deemed as real estate companies for the purpose of the application of the participation exemption regime.

From a registration duties perspective, the tax basis of the registration tax is the sale price of the shares transferred (or their fair market value, if higher). The tax basis will be, in most cases, lower than that of an asset deal ‒ given that the share transfer price necessarily takes into account the liabilities of the transferred company.

The applicable tax rates will be:

• 0.1 % in the event of a transfer of a stock company’s shares (actions);
• 3% in the event of a transfer of a non-stock company’s interests (parts sociales);
• 5% in the event of a transfer of a real estate company (regardless of its legal form) ‒ contrary to the solution described earlier for the application of the participation exemption regime for CIT purposes, real estate assets are always taken into account to determine whether a company is to be considered a real estate company, no matter what they are allocated to the company’s own operational entity.

An intra-group exemption applies if the transferred company is not deemed as a real estate company.

From a VAT perspective, a share transfer is out of VAT scope.

Tax Implications and Incentives for Companies Operating Hotels

The benefits derived from operating hotels are subject to the standard CIT rate. If the hotel owner holds the real estate used for the activity, the building portion could be amortised (ie, a breakdown of the building per component is performed and each component has a specific amortisation duration). The tangible assets related to the hotel business could also depreciate. The amortisation allowances are deductible from the taxable result under the common regime (subject to the specific degressive amortisation regime described in the following paragraph). If the real assets are leased to the hotel operating company, the rents are deductible from the taxable result, provided that the rental fees are fixed in accordance with the arm’s length principle.

The main tax incentive measure applicable to companies operating in the field of hotel activities is the degressive amortisation regime provided for by Article 39 A of the French Tax Code. This regime allows companies to proceed with the amortisation of assets faster than under the standard amortisation regime. Hotel equipment used for the purposes of hotel activities fall within the scope of this regime, provided that the equipment is acquired new and that the normal length of use of these assets is at least three years. Buildings and construction work related to such buildings also fall within the scope of this regime.

Some incentive regimes are also available for hotel projects carried out in specific regions and are subject to a series of conditions. By way of example, SMEs can benefit from a tax credit equal to 20% or 30% of the amount of certain investments, including hotel projects and similar establishments meeting specific criteria, made in Corsica (Article 244 quarter E of the French Tax Code).

In addition, it should be noted that companies operating hotels are not subject to the 3% tax assessed on the fair market value of the real properties held by a French company, as the assets are allocated to the company’s own operational entity.

Tax Implications for Other Entities Involved in the Hotel Investment Structure

In the case of a hotel management agreement concluded with the hotel business owner (ie, owner of the fonds de commerce hotelier), the following tax implications apply.

• The fees the hotel business owner paid to the manager/operator are deductible from its taxable result under the common regime (assuming they have been determined in accordance with the arm’s length principle, which is presumed between non-related parties). In the case of cross-border flows, the terms of the agreements must be examined in detail ‒ in particular, as the distinction between the provision of services and royalties may be sometimes delicate and could potentially trigger withholding tax issues. Indeed, the tax qualification of the cross-border flows may depend on the provisions of the applicable double tax treaty and on the guidelines of the local authorities.
• The fees received by the manager/operator are taxable in France at the standard CIT rate if the manager render its services from France (through a company or through a permanent establishment that is structured as a branch). For foreign managers’ companies that render their services with some of their employees located in France (eg, in the case of reverse hotel management agreement), the question of the existence of a permanent establishment may arise.

In case of franchise agreement concluded with the hotel business owner (ie, franchisee), the following tax implications apply.

• The royalties paid by the franchisee should be deductible from its taxable result under the common regime and, in the case of cross-border flows, the royalties’ payment may trigger withholding tax depending on the provisions of the applicable double tax treaty.
• Should the franchisor be a French company or a permanent establishment of a foreign entity, it will be taxable on the royalties received at the standard CIT rate.

In the case of lease agreement concluded between a real estate owner (ie, lessor) and the hotel business owner (lessee), the following tax implications apply.

• The rental payments should be deductible from the taxable result of the lessee under the standard CIT regime at its level, provided that the rents are fixed in accordance with the arm’s length principle.
• The lessor will be taxable on the rental income at the common CIT rate.

There are several zoning classifications and regulations to consider both at geographical and administrative levels. Requesting a town planning certificate (certificat d’urbanisme) from the city allows parties to obtain a clear picture of the situation of a property vis-à-vis town planning and zoning applicable rules.

A town planning certificate is valid for 18 months from the date of issue. During this period of time, ir guarantees the consistency of all the information it provides, notwithstanding any new regulations entering into force in the meantime. These regulations will not be applicable to the designated building. Hence, any administrative authorisation application (such as building permits) will be processed according to the rules and regulations (including tax rates) in force at the date of issuance of the planning certificate.

Two different types of planning certificate can be obtained:

• an information planning certificate can be requested when seeking to know all the town planning rules applicable to a specific plot of land; and
• an operational planning certificate can be requested when seeking a position from the administration on the compliance of a specific project with town planning regulations applicable to a designated plot of land.

Most of the zoning classifications and regulations regarding use would be provided in the Local Urban Planning Scheme (Plan Local d’Urbanisme (PLU)). The PLU reflects the overall development and town-planning policy and consequently lays down the rules for development and land use.

The PLU classifies zones that imply specific uses, as follows.

• Urban zones (Zone U) and zones to be urbanised (Zone AU) are designated for urban areas that usually have sufficient infrastructures, businesses, and residential units.
• Agricultural zones (Zone A) are areas protected for their agronomic, biological or economic potential.
• Natural and forestry zones (Zone N) are areas protected for their natural interest.

Hotels can be operated in urban zones U and AU. In Zones A and N, a specific authorisation must be requested. In some cases, the development of a hotel might require requesting a change in the PLU, which is a lengthy process with an uncertain outcome.

Also, the destination of the building needs to be considered when contemplating a hotel project. Please see 6.5 Restrictions on Conversion for further details.

Several building and development regulations are to be considered when contemplating a hotel project.

Fire Regulations

Hotels are subject to specific rules governing fire and panic safety in establishments open to the public (établissements recevant du public, or ERP). Applicable rules depend on the capacity of the hotel (both guests and external visitors), which relate to the following topics:

• buildings (floors must be separated by fire-protection barriers, staircases must be enclosed);
• interior fittings (partitions between rooms and corridors must be fireproof and doors must be flameproof);
• exits (staircases must comply with width regulations, signage must be clearly visible both during the day and at night, and furniture in lobbies must be arranged so as not to impede public circulation);
• electricity, gas, heating and lighting installations (must comply with specific rules); and
• rescue and fire-fighting equipment (fire-fighting, signs, warnings, and surveillance procedures are strictly regulated).

Specific fire and safety rules for high-rise hotels

Hotels where the lowest floor of the top level of the building is more than 28 metres above the highest ground level that is usable by public fire and rescue service vehicles are considered high-rise buildings (immeubles grande hauteur, or IGH) and must comply with specific rules – notably, on the following matters:

• evacuation distance and route;
• lighting and power sockets;
• fire access and fire detection;
• equipment in the rooms (eg, cooking appliance, kettles); and
• human resources (eg, team dedicated to safety, with specialised training).

Compliance

Compliance with the above-mentioned rules is checked in the following ways.

• For hotel development ‒ firstly, plans along with the review of the building permit application are checked by the City. Secondly, a security commission makes another check before the opening of the hotel. If the security commission issues a non-compliance opinion, the hotel cannot open and the non-compliances stated in the opinion must be addressed and remedied.
• For hotels in operation ‒ a security commission visits the property at least every three years. Following inspection, the commission issues an opinion. Any non-compliance opinion states the necessary measures to be taken. The security commission also conducts unannounced visits.

Accessibility Rules

Hotels must comply with accessibility rules for disabled persons. The general principle of such regulations is that disabled persons must be able to move around inside the hotel (both within and between floors), they must have access to adapted parking spaces (if the hotel has a parking), and they must be able to freely use interior and exterior equipment and furnishings (eg, lighting systems).

In new buildings, compliance with accessibility standards is mandatory. In existing buildings, derogations may be granted if they are justified.

Hotel constructions or refurbishments resulting in heavy work or the creation of a surface area exceeding 20 square metres require an administrative authorisation, which can be obtained by filing a building permit application with the local municipality. In practice, this process is handled by the architect in charge of the project.

If the refurbishment project is minor, a simplified procedure called the prior declaration (déclaration préalable) can be followed.

To be processed, the application must be submitted in full and contain:

• plans (site, buildings cross-section, exterior, roof and facade);
• presentation notice (presenting the plot, the layout, the project and its surroundings, access, parking, materials, colours, etc);
• graphic documents; and
• close-up and distant pictures.

Other documents might be requested during the process.

Once duly submitted to the relevant City department, and provided the file is deemed complete by the administration, the application must be processed within three months. In practice, the administration usually requests additional documents or information, postponing the start of the processing period. In Paris, it generally takes a year of exchanges with the administration before the file is considered complete and the official processing period starts. During the processing period, additional documents can be requested and questions can be asked by the administration as well.

After the three-month processing period, the administration issues its decision. There are several possible outcomes:

• approval (note that lack of response is considered as an approval);
• approval with conditions;
• rejection; and
• suspension of the decision (ie, the application requires further analysis).

If the application is rejected or suspended, the applicant can request an ex gratia appeal from the municipality within two months following the decision. If this procedure results in another unfavourable outcome, the applicant can challenge the decision before administrative courts within two months following the second decision.

If the application is approved, the building permit is valid for three years and the work must start within this period. If the work started during the validity of the building permit but is interrupted for more than a year for any reason, the building permit will also expire. The validity of the building permit can be extended twice for one year each time, provided that:

• the request is made at least two months before expiration; and
• approval is obtained from the administration.

Once obtained, building permits and prior declaration must be displayed on the building during the entire period of work and for a minimum of two months.

Owing to the above-mentioned obligation to display building permits and prior declarations, the public and surrounding residents are informed about construction or refurbishment projects.

From the date the administrative authorisation is displayed, third parties have two months to challenge it. They can do so by either:

• submitting a request to the City (recours gracieux) to reconsider the authorisation; or
• contesting the validity of the administrative authorisation before the administrative courts (recours contentieux).

A claim is only admissible if the third party introducing it has a legitimate interest in the procedure (intérêt à agir). A legitimate interest is proven when the third party can demonstrate that the authorised project directly impacts the conditions of occupation, use, or enjoyment of a property it owns or occupies.

In addition, an administrative authorisation can be withdrawn within three months of being granted if the administration realises that the application was made on the basis of false or fraudulent information or declaration.

Under French urban, planning and construction rules and specifications, each building has a designated use and destination.

The different uses are:

• residential; and
• non-residential (all other uses).

The different destinations are:

• residential;
• agricultural and forestry exploitation;
• commerce and service activities;
• public interest facilities and public services; and
• other activities in the secondary and tertiary sectors.

Hotels must be operated in buildings registered for non-residential use and with a commerce and service activities destination, which includes a specific sub-destination category for hotels.

A change of use and/or destination can be requested in a building permit or prior declaration application.

In practice, such requests are treated in accordance with local regulations (mainly the PLU), reflecting the specific planning policy of the City. Specifically, if a building is registered for a residential use, it is typically challenging to obtain approval for converting it to a non-residential use with a commercial or service destination. In Paris, any change of use of a building that would result in decreasing the number of available residential units would only be authorised by the administration if there are compensatory measures. Generally, the compensatory measure for such case involves creating new residential units in the same area, such as converting a non-residential use existing building to a residential one.

Hoteliers wishing to open a hotel in areas classified as heritage sites must consider the constraints involved. Notably, buildings whose preservation is of public interest from the point of view of history or art can be classified as historical monuments, as can their surroundings.

Buildings (including hotel properties) that are classified as historical monuments (immeubles classés au titre des monuments historiques) ‒ owing to their historical, artistic or architectural interest ‒ are subject to special conservation measures. These measures ensure that any potential maintenance, repair, restoration or modification work will be conducted while preserving the cultural interest that justified their protection.

The French Heritage Code (Code du Patrimoine) provides that a building classified as a historical monument cannot be destroyed, moved or undergo restoration or modification work without the prior authorisation of the prefect.

Work authorised by the prefect is to be conducted under the scientific and technical supervision of the government departments in charge of historical monuments. The supervision starts at the early stage of drafting of preparatory documentation and technical studies and lasts throughout the work until completion.

Buildings (including hotel properties) that are classified as remarkable heritage site (patrimoine remarquable) or located in a designated classified perimeter – or within sight of a building classified as historical monument (immeubles classés au titre des monuments historiques) and less than 500 metres from it ‒ are subject to a public easement designed to protect, conserve and enhance their cultural heritage. As a result, any work likely to modify the external appearance of a protected building or a perimeter (for features not part of the building, such as courtyard or garden) is subject to prior authorisation from the Architect of French Buildings (Architectes des Bâtiments de France, or ABF).

The ABF ensures that the work does not adversely affect a classified building or its surroundings and considers for its mission all the following features of a project: architecture, natural or urban landscape, quality of the constructions and their harmonious integration into the surrounding environment. In practice, it is recommended to involve the ABF at all the steps of the project (including the pre-project phase) to maximise compliance with heritage protection rules and limit delays in the authorisation process.

Hotel operations as such do not require any operating licence under French law. However, food and beverages services – which are very often offered in hotels ‒ require completion of specific formalities, as follows.

• Regarding food ‒ hotel operators must file a health declaration with the prefecture of police of the hotel’s location.
• Regarding alcoholic beverages ‒ hotel operators must have a licence to sell alcoholic beverages. There are several licence types depending on the type of alcohol being sold. The most common licence is the licence IV, which is the broadest licence and the one required to serve spirits.

The hotel entity is considered the owner of the licence – although an operator of the licence, who must be an individual, must be designated. The individual must comply with specific criteria, including:

• having completed a 20-hour training – following which, a permit is obtained (valid for ten years); and
• not having been convicted of specific felonies or misdemeanours.

There is a limited number of licence IVs per city and per capita. Therefore, as major cities are often at their limit, it is necessary to buy an existing licence from a third-party holder. The price of buying an existing licence IV is freely determined by the parties and varies from one city to another. Currently in Paris, a licence IV is transferred for a price between EUR25,000 to EUR40,000.

Once all the terms and conditions of the purchase agreement have been determined for the transfer of the licence IV, a request for the transfer of the licence IV must be submitted to the prefecture of police, who needs to approve it. The approval from the prefecture is to be provided as a condition precedent to the purchase agreement. The prefecture will check that the new designated licence operator meets the requested criteria. The final approval of the transfer depends on the sole decision of the prefecture, who may refuse it for specific reasons such as preservation of public order.

Certifications and Labels

The EU implemented the EU Ecolabel, which is applicable to tourist accommodation and designed to help customers identify environmentally friendly hotels that are guaranteed to be sustainable. This label is the only official environmental label for hotels but is not very common – for example, only 50 hotels in Paris have the EU Ecolabel (ie, approximately 3% of all hotels in Paris).

Hotels often claim a variety of private certifications or labels, but the criteria and methods for controlling compliance can sometimes be obscure. There is no particular private certification that stands out from the rest ‒ although most customers refer to France’s official star-ranking (monitored by the public organisation in charge of tourism, Atout France).

Additionally, the list of official criteria for awarding stars to hotels now includes environmental and sustainability criteria, consequently implementing new environmental standards for mid-range to high-end hotels.

Environmental Laws and Regulations

Hotels operated in large buildings fall within the scope of French laws that are designed to limit environmental impact of economic activity and these hotels are subject to reporting obligations on their energy consumption and must meet specific energy consumption targets.

Hotels’ environmental obligations are evolving rapidly and are a key challenge for hotel operators. By way of example, starting in 2026, hotels will be required to display environmental information, clearly indicating the environmental footprint of a one-night stay with breakfast in the establishment. The information takes the form of a grade between A and E, depending on the impact of the stay, and is evaluated in terms of greenhouse gas emissions, water consumption, consumption of non-renewable resources, and the proportion of organic or ecolabelled products in the hotel’s supplies.

French employment law imposes specific requirements in the framework of hotel transactions (and, more generally, in the event of any business transfer).

Automatic Transfer of Employees

In the event of an asset deal, or a change of hotel operator, all the employment contracts attached to the business being transferred automatically transfer to the new owner or the new operator, pursuant to Article L 1224-1 of the French Labour Code. This provides that – in the event of a business transfer, which includes sale, merger, change of activity, incorporation, or sale of part of a business – all employment contracts in effect at the time of the business transfer are automatically transferred to the company taking over such business.

Article L 1224-1 of the French Labour Code applies whenever an autonomous economic entity exists, is transferred, and retains its identity within the purchaser company. French case law defines the economic entity as “an organised group of individuals and material or immaterial means used to operate a business carrying on its own purpose”.

The economic entity therefore must have an autonomous organisation, which implies that there is a staff dedicated to the transferred activity ‒ ideally with a specific management. The economic entity must also have its own means (material and/or immaterial) to operate the business. When an autonomous economic entity has been identified according to the above-mentioned criteria, the employment contracts of the employees who are dedicated to this entity will be transferred, provided that the transferee (purchaser) performs the same activity as the transferor and under the same conditions.

Such rules will therefore apply in the event of a transfer of a hotel’s operations ‒ for example, a sale of business assets or a change in hotel management. The employees would transfer under the same terms and conditions (and the new employer cannot impose on them any changes in their employment agreements) and they would not be able to object their transfer. Following a transaction, purchasers and new operators often seek to align the hotel’s HR policies with group-wide standards. However, French employment law imposes strict limitations on modifying employee terms and conditions.

Employment liabilities would transfer and a thorough HR due diligence process would therefore be recommended on the purchaser’s side ‒ in particular, with regard to the following topics, which are of significant importance in the hotel industry:

• compliance with working time rules, minimum wage, and the specific provisions of the applicable collective bargaining agreement;
• pending litigation with current or former employees;
• status of fixed-term and seasonal contracts, as well as exposure to re-qualification risks; and
• prohibition of dismissing employees prior to an automatic transfer.

Should a hotel transaction trigger automatic transfer of employees, the initial employer company cannot dismiss employees in view of avoiding their automatic transfer to the future employer company. Any termination that would be linked to the change in owner or operator may be challenged by the employees concerned, triggering reinstatement claims and payment of damages for unfair dismissal.

If a reorganisation triggering headcount reductions is planned after the transfer, the new employer company must be able to justify valid economic grounds and comply with a specific process.

Obligations to Inform and Consult the Social and Economic Committee

In transactions involving French companies with 50 employees or more, such companies would have to involve their Social and Economic Committee, which is a mandatory employee representative body.

A specific information and consultation procedure would have to be followed (the maximum duration of which is set by law at between one and three months) and such procedure must be implemented and finalised before any final decision is taken. No binding document should therefore be signed before the Social and Economic Committee has given its opinion on the contemplated project. In the framework of such procedure, each company will have to provide precise and complete information to its Social and Economic Committee ‒ in particular, with regard to impact on employment, working conditions, and collective status.

Specific Employment Risks Linked to Hotel Management Agreements

In hotel management agreements, hotel employees are usually employed by the owner. However, they are working closely with the operator, which may trigger co-employment risks.

Indeed, should it be evidenced that a subordination link exists between the owner’s employees and the operator, the employees concerned could argue (generally further to the termination of their employment contract) that they are de facto employees of the operator and that they should therefore be entitled to termination payments and damages from the operator. Such co-employment risk exists where the operator directs and controls the owner’s employees, even though they are technically employees of the owner. Such risk would in principle not exist within the framework of a “reverse” hotel management agreement, where the operator employs the hotel staff directly, except if the operator’s employees are working under the control of the owner (as, in such case, they could argue that they are de facto employees of the owner).