In general, both private and public law are relevant to hotel transactions.

The main private law sources are the Swiss Code of Obligations (CO) and the Swiss Civil Code (CC), which apply uniformly in the whole of Switzerland ‒ ie, irrespective of the hotel property’s exact location within the country.

In Switzerland, public law consists of rules and regulations at the federal, cantonal and municipal levels. At the federal level, the Lex Koller (see 2.3 Restrictions on Foreign Acquisition) and – in touristic regions – the Lex Weber (see 6.5 Restrictions on Conversion) are particularly relevant to hotel projects. Although both laws are federal, they are implemented by cantonal authorities whose practice often varies. Meanwhile, the cantonal and municipal public law sources vary according to the canton and municipality in which the hotel property is located.

In addition to property, contract and tax laws and – in the case of share deals – corporate law, which apply to all real estate transactions (ie, also to transactions that do not involve hotels), licensing and regulatory compliance laws (eg, health, liquor, safety and fire safety regulations), employment law and IP law regularly apply to hotel transactions.

Both asset and share deals are common in Swiss hotel transactions. The choice of the optimal hotel sale and purchase structure depends on various factual, legal and tax considerations.

In an asset deal, a hotel property sale is only valid if the sales agreement is prepared in an officially recognised local language (German, French or Italian, depending on the canton), notarised by a local notary, and registered in the local land register.

In a share deal, the parties have a greater leeway in terms of the form and modalities of the sales agreement, which is typically not notarised. Share deals are, however, driven to a large extent by the legal form and domicile of the target company or companies (which may be outside of Switzerland) and by the questions of whether the hotel property and operations are held by the same company or separate ones (ie, by a PropCo and an OpCo) and ‒ in the latter case ‒ sold together or not.

Hotel transactions and their terms are generally kept confidential in Switzerland unless the involved parties decide to publish them.

In an asset deal, the ownership transfer has to be registered in the land register to become effective. The land register has a limited publicity: the general description of the plot, name of the owner, type of ownership and date of acquisition – as well as some types of easements and some types of private and public restrictions on ownership – are public. By contrast, the commercial terms of the sales agreement (in particular, the purchase price) are generally not. A notable exception to this rule is the canton of Geneva, where the sales prices of property (including hotel) transactions registered in the land register are published in the cantonal official gazette.

In a share deal, the land register is not involved. While the sales agreement and its terms are typically not registered in the public commercial register, share deals regularly – albeit not necessarily – lead to certain corporate changes (such as the composition of the board of directors at the level of the target company or companies), which are public.

In Switzerland, specific regulations regarding foreign investments in real estate are governed by the Federal Act on Acquisition of Real Estate by Persons Abroad ‒ the so-called Lex Koller ‒ which has existed since the 1960s. According to the Lex Koller, foreigners are allowed to purchase a hotel or parts of a hotel (suits, serviced apartments) without prior authorisation, provided that the property qualifies as a permanent business establishment. If it is not immediately obvious that the operation is entirely commercial (notably, in cases where there are serviced apartment units to be sold to third parties), the plot is unbuilt or the plot contains more than two-thirds of unbuilt surfaces, the buyer must apply for a non-subordination decision rendered by the competent cantonal authority.

For transactions that include other types of real estate (second homes, vacation apartments), the buyer must apply for an authorisation rendered by the competent cantonal authority. Such authorisations are subject to a certain quota per canton. In some cantons the quota can be used in priority for hotel complex transactions with the aim of promoting economic development and facilitating investments in the hotel sector.

Privately owned hotels are quite common in Switzerland, especially in rural and resort areas. These hotels are typically owned by individuals or families who manage the operations themselves or hire a management team. This model allows for greater control over the hotel’s operations and brand identity. Owners have full control over the hotel’s operations, branding, and decision-making. They bear all the financial risks and rewards, and can implement changes quickly without needing approval from external parties. This structure offers significant flexibility but also requires the owner to manage all aspects of the hotel.

While they are certainly less common than hotel lease agreements in Switzerland, hotel management agreements are nevertheless relatively frequent in large cities and in the luxury segment. Under these agreements, the hotel owner retains ownership of the property but mandates a management company to operate the hotel. This arrangement allows owners to benefit from the expertise and brand recognition of established hotel management companies. The management company typically earns a fee based on the hotel’s revenues or profits. Although owners have less direct control over daily operations, they can set performance targets and standards. This arrangement leverages the management company’s experience while allowing the owner to focus on broader business goals.

Lease agreements are very common in the Swiss hotel industry. In this model, the hotel owner leases the property to an operator who runs the hotel independently. The operator pays a fixed rent to the owner, regardless of the hotel’s performance. The lessee has full control over the hotel’s operations and bears all operational risks. This structure ensures a steady income for the owner and lessor while giving the lessee autonomy in managing the hotel. However, lease agreements often involve long-term commitments, which can limit flexibility for both parties. Swiss tenancy law also provides for a number of mandatory provisions that may limit the parties’ choice.

Franchising agreements are also widely used in Switzerland. In this model, the franchisee (ie, the hotel owner or lessee) operates the hotel under a franchise brand, following the franchisor’s standards and guidelines. The franchisee must adhere to the franchisor’s standards and guidelines, which can limit operational flexibility. The owner pays fees to the franchisor for using the brand and receiving support in areas such as marketing, training, and reservations. This structure allows owners to leverage a well-known brand while receiving support in various aspects of hotel management and/or distribution.

A hotel management agreement is usually entered into between the hotel owner and the management company. In some cases, if the hotel owner does not own the hotel property on which the hotel is operated, there may be additional parties (eg, a lessee). In such case, this additional contractual relationship will be subject to a lease agreement.

The management company is usually engaged as the exclusive manager of the hotel for a specified term and is responsible for operating the hotel in accordance with the brand standards and the management system. The management company may have full control and discretion over various aspects of the hotel’s operations, including furnishing, equipment, servicing, marketing, operation, management, supervision, and direction of the hotel and its personnel.

The management company typically earns a fee based on the hotel’s revenue or profits. This can include a base management fee and an incentive fee tied to the hotel’s performance. The agreement may include specific performance targets and standards that the management company must meet to ensure that the hotel operates efficiently and maintains the brand’s reputation. The owner may have certain obligations, such as providing funds for capital expenditures, maintaining the property, and ensuring compliance with local regulations.

The agreement specifies the term of the engagement (which can range from several years to a few decades) and outlines the conditions under which either party can terminate the agreement, such as breach of contract or failure to meet performance standards. There may be additional provisions unique to the specific hotel management agreement, such as exclusivity clauses, dispute resolution mechanisms, IP, third-party arrangements for licensing, and confidentiality agreements.

The implications for hotel management include significant control and autonomy for the management company over the hotel’s operations, allowing it to implement its expertise and brand standards effectively. The owner benefits from the management company’s expertise and brand recognition, while the management company earns fees based on the hotel’s performance.

A typical hotel lease agreement outlines the relationship between the lessor (ie, the entity that owns the real estate) and the lessee (ie, the entity that operates the hotel itself or delegates the operation to a hotel manager) (see 3.2 Hotel Management Agreements).

Swiss tenancy law provides for two types of lease agreements. A regular lease agreement covers a movable asset without regard to its actual productivity: the lessor grants the lessee the use of the asset in return for rent. On the contrary, a usufructuary lease takes into account the productivity of the rented asset: the lessee has the right to use, operate and profit from the asset in return for a fee paid to the lessor (in addition to the rent). However, if the lease agreement contains too many clauses that are not inherent to the lease agreement (eg, clauses that restrict the tenant’s use of the property in favour of the lessor), there is a risk that the agreement may no longer be classified as a lease agreement but as a mandate agreement under Swiss law.

The lease agreement usually specifies the parties involved, including the owner and the operator. The agreement grants the operator the right to use the hotel property for a specified term, which can range from several years to a few decades. The lease term often includes renewal options, allowing the operator to extend the lease for additional periods.

The rent structure is a crucial component of the lease agreement. It typically includes a fixed-base rent, which the operator pays to the owner regardless of the hotel’s performance. In some cases, the rent may also include a variable component based on the hotel’s revenue or profits. This arrangement ensures that the owner benefits from the hotel’s success while providing a stable income.

The agreement outlines the responsibilities of both parties. The operator is responsible for managing the hotel’s operations, including maintenance, staffing, and compliance with local regulations. The owner may have obligations such as providing funds for capital expenditures and ensuring the property’s structural integrity.

Termination clauses are also an essential part of the lease agreement. These clauses specify the conditions under which either party can terminate the agreement, such as breach of contract or failure to meet performance standards. The agreement may also include provisions for dispute resolution, confidentiality, and exclusivity.

In Switzerland, franchising agreements are so-called innominate contracts that are governed by general contract law principles. There is no specific legislation dedicated to franchising. Franchising agreements are often entered into jointly with lease agreements, whereby the hotel owner leases the hotel property to a “white-label” operator under a lease agreement who in turn enters into a franchising agreement with a franchisor.

Franchising agreements typically include provisions on:

• use of IP rights and branding – granting the franchisee the right to use the franchisor’s IP rights and branding materials;
• operational guidelines – detailed manuals and standards that the franchisee must adhere to, ensuring consistency across the brand;
• training and support – obligations of the franchisor to provide initial training and ongoing support to the franchisee;
• fees and royalties;
• territorial rights ‒ defining the geographic area where the franchisee can operate, often with exclusivity clauses; and
• duration and renewal ‒ terms of the agreement, including the initial duration and conditions for renewal.

While there is no specific franchising law in Switzerland, certain legal considerations are pertinent. Specifically, the proper registration and protection of trade marks and other IP are crucial to prevent infringement issues. Further, franchising agreements must comply with Swiss competition law, particularly regarding clauses that may restrict competition (such as non-compete clauses). Finally, franchising agreements should provide for clear terms regarding their duration and termination.

Hotel transactions in Switzerland may be financed through:

• mortgage loans ‒ traditional financing from Swiss (or, in rare cases, foreign) banks (or, in rare cases, insurances), secured by mortgages on the hotel property;
• crowdfunding and alternative financing ‒ emerging financing methods (including crowdfunding platforms and debt funds) are gaining traction, especially for boutique hotels and unique hospitality projects; and
• government support – the Confederation-backed Schweizerische Gesellschaft für Hotelkredit (SGH) provides loans at preferential rates to support the hospitality sector, particularly in touristic regions.

Mortgage loans remain the most common financing method, often complemented by equity investments. Government support through SGH is a significant factor for projects in certain less-developed touristic areas.

There are no restrictions applying to granting security to foreign lenders with regard to hotel properties that qualify as permanent business establishments under the Lex Koller – ie, to most hotel properties (see 2.3 Restrictions on Foreign Acquisition). By contrast, if a hotel property is subject to the Lex Koller, a financing by foreign lenders has to be carefully assessed. Even in such case, a financing that complies with the standard mortgage practice applied by Swiss banks (ie, loan-to-value ratio below 80%, standard security package, standard terms of the loan agreement, etc) is generally permitted.

Taxation of Transactions

In Switzerland, the tax consequences of hotel transactions heavily depend on the underlying hotel operation structure and the transaction structure itself – ie, particularly on whether the transaction is structured as an asset deal or a share deal and, in the latter case, on whether the hotel property is sold together with the hotel operations or separately.

In the case of a sale and purchase of a hotel target company that owns the hotel property and carries out the hotel management at the same time, such company should not qualify as a real estate company and thus not be subject to real estate capital gains tax. However, should the property be held in a separate legal entity, then it should qualify as real estate company.

In addition, the cantonal (and municipal) location of the hotel property is crucial.

At the federal taxation level, corporate income tax generally applies, whereas on the cantonal and municipal taxation level, either corporate income tax and/or real estate capital gains tax apply (dualistic versus monistic taxation scheme). In the case of a share deal, generally speaking, any gains on any taxation level is exempted under the participation exemption regime. However, if the sold hotel company qualifies as real estate company, real estate capital gains tax is generally triggered nonetheless in cantons who follow the monistic system (eg, Zurich).

Real estate capital gains tax on cantonal level of a monistic canton is often the most critical tax in such transactions, as its rates not only vary from canton to canton but potentially also from municipality to municipality. Notably, the real estate capital gains tax rates regularly decrease over time and they are intended to “punish” short-term holding periods with higher rates (up to 60% for less than one year) compared to long-term holding (down to 2% depending on the canton/municipality after more than 25 years).

Real estate capital gains tax and also corporate income tax on property transactions are not only a topic for the seller to deal with – given that they are often secured with a legal lien on the underlying property, buyers should also take into account measures to reduce the risk of such a legal lien. Often, the risk can be reduced by depositing an amount equalling the expected tax amount with the pertinent tax authorities, but such possibilities depend on the tax legislation of the canton of situation.

In addition, a significant number of cantons applies real estate transfer tax at rates of 1–3.3%. In most cantons, the buyer is liable, but some cantons recognise a joint liability or a 50:50 split. Whether real estate transfer tax is levied not only on asset deals but also on share deals, for real estate companies, depends on the canton of situation. In addition, real estate transfer tax is often also secured by a legal lien. Land register and notary fees should also be taken into consideration.

In case of asset deals, VAT generally applies (or is opted for). However, the VAT liability can or even may have to be settled cash-less via the so-called notification procedure, which leads to the buyer stepping into the VAT position of the seller, and thus triggers the need of additional protection on the buyer side.

In case of share deals, (dividend) withholding tax needs to be reviewed as well, and not only with respect to future dividend distributions to the buyer. By way of example, in the case of Swiss special purpose vehicles as targets, there may be a latent withholding tax burden that is transferred together with the target entity (so-called old reserves) or there may be an unexpected withholding tax burden for the buyer in the event of liquidating the unnecessary special purpose vehicle shell (so-called substitute liquidation).

Tax Incentives

There are generally no specific tax incentives, abatements or grants for hotel projects.

In general, hotels can be constructed in centre, mixed and hotel zones.

Hotel zones are created to avoid the conversion of hotels into housing units, protect existing hotels, and ultimately preserve the hotel and touristic industry.

If the zoning does not allow hotels, one may apply for a derogation (which is, however, rarely granted) or approach the relevant authorities to obtain a change of the zoning, which is a fairly lengthy urban planning process. If granted, such changes of the zoning may in certain cases result in a levy (Mehrwertabgabe).

The applicable building and zoning regulations provide for the density and the floor ratio. In some cantons, it is possible to obtain a bonus on the building index for hotels or underground parking. The technical norm applying to parking slots requires 0.5 parking slots per hotel bed ‒ although the applicable building and zoning regulations might differ from the technical norm.

The applicable building and zoning regulations may also set a maximum height, which implies that existing building cannot be raised.

The technical standards applicable to fire protection requirements classify hotels into different categories depending on the accommodation capacity. These standards specify various requirements in terms of fire-resistant materials (eg, for interior furniture) and for the division of the building into compartments to limit the spread of fires (which may influence the internal layout of rooms). These standards also include the obligation to have a fire detection and alarm system, fire extinguishing installations (extinguishers, sprinklers), evacuation and exit routes, and ‒ in some cases – emergency evacuation training for hotel staff.

As buildings open to the public, hotels must comply with the requirements to ensure accessibility for all individuals, particularly those with mobility or sensory impairments. The requirements include accessibility to the entrances, rooms and sanitary facilities. One can apply for a derogation by demonstrating that the requirements are met in another way. The competent authorities can grant or deny derogations based on the principle of proportionality.

The building permit procedure starts with the submission of a full request to the competent authority (municipality/canton). The competent authority then checks compliance of the project with statutory law and requests the specialised departments (municipality/canton) for their notices. Said departments may return with negative notices requiring changes to the project or with positive notices subject to conditions that must be included in the building permit.

The building permit request is published in the official gazette during a certain period of time (usually 30 days) and the objectors must file their objection within this period. The competent authority processes the objections (if any) and grants the building permit following the positive notices. Unsuccessful objectors can then appeal against the building permit.

Any person or company affected by a construction project may file an objection to the project during the publication period in the official gazette (ie, usually 30 days). In principle, the objector must have a direct view of the new building/refurbishment and a practical interest in obtaining the cancellation of the project. In the case of purely interior renovations, the authorities may refuse to recognise the objector’s practical interest and its right to appeal against the building permit. It is also possible to negotiate with the objectors to obtain the withdrawal of objections/appeals.

Some municipalities have enacted building and zoning regulations to limit the conversion of hotels into housing units, with the aim of protecting the hotel sector. In addition, the Federal Act on Second Homes (so-called Lex Weber) restricts the conversion of existing hotels into housing units. The Lex Weber applies to municipalities with more than 20% of second homes – ie, essentially to all municipalities in alpine touristic regions.

Notably, hotels in prime locations or within historic buildings are regularly subject to heritage protection, which can restrict the options to change their facade and exterior appearance and sometimes extends to the interior (eg, staircase, ballroom). Heritage protection may also prohibit the demolition of the existing building or, in the case of refurbishment, the raising of the building’s height.

Each canton designates its own competent authority to issue operating licences. The operator must submit an application containing the relevant information about the hotel, the owner and the operator.

The requirements for obtaining an operating licence vary from canton to canton. In general, the operator must complete a specific training course and provide proof of qualifications, as well as an employment agreement stating that the operator is responsible for the establishment. The operator must also state whether food and drink will be served and provide plans of the premises. The occupancy permit must also be provided to show that the works comply with the building permit, particularly for new hotel openings.

The granting of an operating licence is published in the official gazette.

The sustainability certifications demonstrate a commitment to environmental responsibility and assess buildings based on criteria such as energy efficiency, resource management, and overall environmental impact.

In terms of local certificates, Minergie is a Swiss certification focusing on buildings with low energy consumption and high-quality living standards. In some cases, Minergie certifications give right to certain construction index bonuses or other types of incentives, based on the applicable cantonal laws on energy and construction.

In terms of international certificates, some Swiss hotels have achieved in particular the LEED (Leadership in Energy and Environmental Design) standard – a globally recognised certification system.

The acquisition of a hotel property including its operation (ie, excluding transactions where the hotel property is acquired without the hotel operation) often qualifies as a transfer of business. In such cases, all existing employment contracts of the hotel are automatically transferred to the buyer.

The employee can reject the transfer but, if the employee elects to do so, the employment terminates after the lapse of the statutory rather than the contractual notice period. Despite the employee’s decline of the transfer, the acquirer and the employee have to perform the employment relationship during the notice period. In the case of a transfer, all terms and conditions (including the employee’s years of service) transfer to the acquirer. If a collective bargaining agreement applied, the acquirer remains bound by such collective bargaining agreement for one year following the transfer, unless the collective bargaining agreement expires or can ordinarily be terminated with effect prior to the end of this one-year term.

The employees do not enjoy any enhanced protection and, like any other employer, the acquirer can change the employment conditions or even terminate the employees by respecting the ordinary contractual notice period. Even the transferor can give notice of termination prior to the transfer, provided the notice of termination is not solely given to avoid transfer of the employment to the acquirer who would then hire the employee under new conditions without respecting the employee’s years of service. The transferor and the acquirer become jointly and severally liable for all claims of the transferred employees that became due prior to the transfer and that become due until the first ordinary termination date after the transfer or, if the employee rejects the transfer, until the date on which the employment ‒ due to the employee rejecting a transfer ‒ actually terminates.