An operating lease and a long land lease serve different purposes
A hotel operating lease gives a tenant agreed rights to use a property and run the business for a defined period. Acquiring an existing long leasehold interest is a different transaction. The operating tenant’s rights depend on the superior land rights, permission to sublet and any relevant consents; they cannot be assumed to extend beyond them.
Leasing can offer a way to limit initial acquisition spending and assess operations. It can also transfer significant trading, repair and staffing risk to the operator. Zanzibar’s land-tenure system is part of the context, rather than a sufficient explanation for why a particular owner offers a hotel to rent. Understand land rights and the documentation to check.
Compare the models as part of the assessment
For each suitable hotel opportunity, AVA will consider which available structure best matches the investors’ preferences, the owner’s position and the evidence. Options may include acquiring the lawful property or business interest, leasing and operating, a lease with a purchase option, or a management arrangement with a clearly defined role.
The comparison should account for repairs, deposits, fees, approvals, working capital, tax, financing, trading liabilities and exit costs. Lower initial spending is useful only if the full arrangement makes commercial sense. Not every model will be available or appropriate.
A trial lease with a purchase option
Even if a hotel is advertised for sale, AVA may ask whether the owner would consider an initial operating lease with an option to acquire the lawful interest later. An agreed trial period can provide evidence about demand, condition and operating costs before a larger commitment.
Sometimes described as “lease-to-own”, this must be a properly documented arrangement: the interest being acquired, option price or valuation method, exercise dates, deposit treatment, approvals and consequences of not proceeding all need agreement. Rent counts towards a later acquisition only where expressly agreed. A purchase option does not create freehold ownership of Zanzibar’s land.
Rent that reflects the agreed business model
AVA may negotiate a seasonal schedule, an occupancy-linked formula, a percentage of agreed revenue, or a base rent with a variable element. A formula linked to profit or income needs particularly clear definitions of allowable expenses and reporting.
The contract should define the measure, calculation dates, booking cancellations, refunds, taxes, owner use, audit access, payment currency, minimums or caps and dispute process. Test the total annual cost under both strong and weak trading: a flexible formula is not automatically cheaper or safer.
A defined green-season maintenance period
Where a planned closure is justified for maintenance or repairs, AVA may seek an agreed period with reduced or no operating rent. The dates, permitted works, budget approvals, completion checks and reopening obligations should be written into the agreement.
Distinguish a genuine rent waiver from a deferral that becomes payable later. Agree who bears utilities, insurance, security, staff costs, statutory charges and any underlying land rent during closure. Rainy weather alone does not create a right to stop paying rent, and the owner may decline the proposal.
Protect the decision before committing the capital
AVA’s priority is to research the opportunity, negotiate the structure and seek safeguards proportionate to the exposure. Those may include independent legal and technical checks, conditions before completion, staged funding, clear spending limits, an agreed inventory, lender consents and protection for approved improvements.
The assessment should stress-test weak trading, delayed opening, extra repair costs and an unsuccessful exit. Where appropriate, negotiate a break right, assignment or sale route, a release from future obligations and treatment of deposits or unamortised improvements. Refunds, compensation and enforcement depend on explicit terms and the counterparty’s ability to perform.
Begin with the endpoint in mind
A project should have a reasoned route to recovering its costs and achieving an acceptable return for its risk. Test what happens when the trial ends, the option is declined, the lease expires, an investor seeks a transfer, or the business is sold. Check the effect of approval requirements, remaining term, transaction costs and the absence of a ready buyer.
If the evidence does not support a sufficiently credible operating outcome and workable exit, AVA should renegotiate, pause or decline. Careful selection and contractual safeguards aim to reduce avoidable loss; they cannot guarantee capital protection, resale, a buyback or profit.
Local relationships, documented decisions
AVA already has a network of professionals on the island and continues to build relationships that can broaden access to opportunities and expertise. For a particular project, qualified advisers should be appointed with clear responsibilities and appropriate independence.
Investors should receive a clear explanation of the proposed model, what has been verified, unresolved issues, material risks and the conditions for proceeding. Participation remains an individual choice under separate written agreements.
Sources and scope
Reviewed 3 November 2026. The proposed negotiation models above express AVA’s intended approach and depend on owner agreement, lawful rights and project-specific advice. They are not evidence of a measured market trend or a currently available AVA investment.
Background: HVS hotel operating-model analysis; Zanzibar land-rights, registration and due-diligence sources.