A hotel is not worth what it used to be. It is worth what it can become.
The conversion of the former Albergo Le Notarie in Reggio Emilia into a 99-bed student residence is not just a local real estate story.
It is a story about the entire hotel investment market.
Because it reveals, very clearly, a truth that many owners still refuse to confront: not every hotel should remain a hotel.
A property originally built or operated as a hotel does not automatically retain its best economic use forever. Markets change. Demand changes. Costs change. Cities change. Guests change. What was once a competitive hotel can become an underused, fragile asset, expensive to upgrade and potentially more valuable under a different use.
The central question is no longer simply: how much is the hotel worth?
The real question is different: what is the highest-value economic use of the property?
In investment language, this is the concept of highest and best use: the use that delivers the strongest balance between profitability, risk, required capital expenditure, operational sustainability and exit value.
The Le Notarie case should be read exactly through this lens.
The Le Notarie case: from hotel asset to student housing
In Reggio Emilia, the former Albergo Le Notarie, located in a central position just steps from Piazza Prampolini, is being converted into a 99-bed university residence.
The property, previously associated with hotel use, is therefore changing its economic nature. It is not merely being renovated. It is being rethought.
From hotel to student housing.
From short-stay hospitality to university residential accommodation.
From tourism and business demand to structural housing demand.
This shift is far more relevant than it may appear. It means that, in that urban context, the asset may find stronger economic coherence by serving the market of out-of-town university students rather than continuing to compete in the traditional hotel market.
The conversion of the former Le Notarie sits alongside other similar projects in the area, confirming a broader trend: in university cities and mid-sized urban markets, part of the existing hospitality stock may be absorbed by the living sector.
Student housing, hybrid residences, serviced apartments, co-living and medium-stay accommodation are no longer marginal niches. They are concrete alternatives to traditional hotel use.
The question every owner should ask
Many hotel owners still start from the wrong assumption.
They think:
“I own a hotel, so I need to find a way to make it work as a hotel.”
But the correct question should be:
“Does this property generate more value as a hotel, or through another use?”
That is a major difference.
A hotel can be full and still be poorly profitable. It can have a good location but rooms that no longer meet market expectations. It can have an important history but require excessive capital expenditure to remain competitive. It can be officially classified as a four-star hotel while producing the margins of a fragile business. It can have a real estate value that exceeds the value of its hotel operation.
In these cases, continuing to think only in terms of rooms, rates and occupancy is too narrow.
Alternative scenarios must be compared.
Could the property perform better as a repositioned hotel?
Could it be leased to a stronger operator?
Could it be converted into serviced apartments?
Could it work as student housing?
Could it become a hybrid residential platform?
Could it be sold to an investor specialized in living assets?
Could it be enhanced through a joint venture?
Only after this analysis can a rational decision be made.
The guides published on RobertoNecci.it help interpret hotels not as simple operating businesses, but as complex assets made up of real estate value, operational value, business risk, debt exposure, contractual structures and transformation potential.
The value of a hotel does not coincide with its star rating
One of the most common mistakes in hotel valuation is confusing classification with value.
A four-star hotel is not automatically worth more than a three-star hotel. A historic hotel is not automatically worth more than a modern property. A centrally located hotel is not automatically a good investment.
Value depends on the property’s ability to generate sustainable income over time.
And sustainable income does not come from the plaque at the entrance. It comes from a combination of factors:
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real demand;
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positioning;
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product quality;
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operating costs;
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efficient size;
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property flexibility;
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quality of the operator;
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capital required for repositioning;
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planning and authorization risk;
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conversion potential;
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alternative value of the asset.
The Le Notarie case shows precisely this: a hotel property may exit its original function if the market attributes greater value to another use.
That is not a defeat for hospitality. It is an economic decision.
When a hotel is worth more as student housing
A former hotel may be worth more as student housing when certain specific conditions are present.
The first is strong, stable university demand that is not adequately served by existing supply.
The second is urban location: student housing works when the property is accessible, central or well connected, close to university facilities, services and public transport.
The third is the physical compatibility of the building. A hotel already organized around rooms, corridors, systems and services may be more easily converted than other types of property, although adaptation is not always simple or inexpensive.
The fourth is the comparison between hotel profitability and living-sector profitability. If the hotel produces weak margins, requires significant capex, carries high operating costs and competes in a saturated market, conversion may become the more rational option.
The fifth is the presence of incentives, grants or subsidized financing. In many student housing projects, public or semi-public support can materially affect the economic sustainability of the transaction.
But caution is essential: a project does not become sound simply because it is subsidized.
A serious investor must always build two scenarios:
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one scenario with grants, incentives or subsidized financing;
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one scenario without public support, under ordinary market conditions.
If the project works only because of the incentive, the economic risk must be clearly understood. If, on the other hand, the incentive enhances a project that is already sustainable, the transaction may become particularly attractive.
The hidden risk: functional obsolescence in hotels
Many Italian hotels are not in difficulty because tourism does not exist. They are in difficulty because the property has become functionally obsolete.
Functional obsolescence is one of the major hidden issues in the hotel market.
It occurs when a hotel no longer meets market standards, even if it may still be located in a good position.
Rooms that are too small.
Outdated bathrooms.
Inefficient systems.
Common areas that cannot be monetized.
Obsolete meeting rooms.
Layouts inconsistent with modern guest flows.
High energy costs.
An insufficient number of rooms to absorb an adequate management structure.
A non-profitable restaurant.
No experiential spaces.
A product that is difficult to photograph, difficult to sell and difficult to remember.
These issues are not always solved with a simple renovation.
Sometimes the capital required to bring the hotel back to market is so high that an alternative use becomes more attractive.
This is where investor logic must go beyond traditional hotel-owner thinking.
The question is not only how to make the hotel look better.
The question is whether it still makes sense for that property to remain a hotel.
Student housing and hotels: different income profiles, different risk profiles
The comparison between hotels and student housing cannot be made superficially.
Hotels have greater upside potential. If well managed, they can increase rates, RevPAR, GOP and enterprise value. They can benefit from events, international tourism, corporate demand, leisure travel, conference business and luxury positioning.
But they also carry greater volatility.
They depend on distribution, reputation, OTAs, labour costs, seasonality, competition, economic cycles, air connectivity, events, management quality and the ability to sell every single night effectively.
Student housing, by contrast, tends to offer a more stable and predictable profile. Demand is less daily and more structural. Revenue is less tied to dynamic pricing and more linked to the ability to fill beds over longer periods.
But student housing also has its own risks:
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supply saturation;
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student affordability;
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competition from private rentals;
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regulation;
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operating costs;
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maintenance;
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vacancy during summer periods;
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need for shared services;
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rent sustainability;
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risk of overestimating actual university demand.
There is therefore no single answer that applies to every asset.
There is only the analysis of the individual property.
The role of the PNRR and public-sector financing
Student housing conversions often sit within a broader context of public policy, urban regeneration and dedicated financing schemes.
The PNRR has accelerated attention on the shortage of student accommodation. This has made certain projects more attractive than they would have been under ordinary market conditions.
But the PNRR must not become a valuation shortcut.
An investor should never stop at saying: “There is a grant, therefore the project works.”
The correct question is:
“What is the return of the project before and after the grant?”
And also:
“What will the asset be worth when the grant is no longer the central element of the transaction?”
That is the decisive point. Incentives can support transformation, but they do not replace market demand.
Mid-sized cities are the new laboratory
Reggio Emilia is interesting because it is not a major tourist capital. It is not Rome, Milan, Florence or Venice. It is a mid-sized city, with its own university demand, its own urban economy and its own real estate stock to rethink.
That is precisely why the case matters.
In mid-sized cities, the hotel market is often more selective. Not every hotel can sustain high rates, consistent occupancy and continuous reinvestment. Traditional business demand has changed, smaller conference demand has weakened, companies travel differently and guests are far more demanding.
At the same time, many university cities need student beds, professionally managed residences and organized accommodation solutions.
The result is a new competition between uses.
Hotel versus student housing.
Hotel versus serviced apartments.
Hotel versus residential.
Hotel versus living.
In this competition, the winning use is the one that generates the best risk-adjusted return.
Not every hotel should be converted
The opposite risk, however, is just as dangerous: assuming that every underperforming hotel should be converted.
That is not the case.
Many hotels do not need a change of use. They need better management.
Some properties lose value not because of the building, but because of weak operations:
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inadequate revenue management;
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excessive dependence on OTAs;
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uncontrolled costs;
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poor staff organization;
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confused commercial positioning;
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unmanaged reputation;
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absence of management control;
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lack of targeted investment;
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overly emotional ownership;
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no KPI-based decision-making.
In these cases, conversion would be a mistake. The hotel asset still has value, but it must be managed with stronger capabilities.
On NecciHotels.it, the blog dedicated to hotel operations, these issues are addressed from an operational perspective: organization, cost control, commercial performance, margins, staffing and day-to-day management quality.
The distinction is essential.
Some hotels need to be relaunched.
Some need to be refinanced.
Some need to be repositioned.
Some need to be entrusted to a better operator.
And some need to be converted.
Putting them all in the same category means making the wrong investment decision.
The real mistake owners make: looking at the past, not the potential
Many owners value their hotel based on what it used to be.
“It was an important hotel.”
“It has always traded well.”
“It is in a central location.”
“It has history.”
“It used to generate strong revenues.”
“It is a four-star hotel.”
“I have invested a lot in it.”
All of this may have narrative value. But it does not necessarily have economic value.
The market does not pay for the past. It pays for future income.
An investor looks at:
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how much capital is required;
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how much time is needed;
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what authorization risk exists;
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what net income can be produced;
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which operator can manage the asset;
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what exit value is realistic;
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which alternative uses are available;
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which scenario best protects capital.
This is where many owners lose clarity. They confuse emotional, historical or book value with market value.
The Le Notarie case reminds us, instead, that a property can find new life precisely when its old identity is no longer defended and its new economic function is properly understood.
From hotel valuation to alternative-use valuation
Hotel valuation should not stop at the hotel income approach.
Today, a serious analysis must include at least four layers:
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Pure real estate value
What is the property worth regardless of its current operation? -
Hotel operational value
What can the hotel produce if properly managed? -
Repositioning value
How much value can be created through capex, a new brand, a new operator or a new commercial strategy? -
Alternative-use value
What could the property be worth as student housing, serviced apartments, residential accommodation, co-living or another compatible use?
Only a comparison between these four layers can identify the best path forward.
The blog Investhotel.it, which also focuses on corporate distress, turnaround strategies and crisis management, often addresses the loss of hotel value when there is no clear understanding of the relationship between operations, debt, market conditions and real estate value.
What the Le Notarie case teaches investors
The Le Notarie case offers at least five lessons.
First: the Italian hotel stock is not static. It can be transformed, converted and repurposed.
Second: student housing is now a real competitor to hotel use, especially in university cities and mid-sized markets.
Third: hotel classification is not enough to determine value. A four-star hotel may be worth less as a hotel and more as a residential asset.
Fourth: public incentives can accelerate projects, but they must not replace market analysis.
Fifth: every asset must be assessed through alternative scenarios, not through past habits.
This is the new map of hotel investments: not simply buying or selling hotels, but understanding which economic function can unlock the greatest value from the property.
Why this transformation also matters for major destinations
This issue is not limited to Reggio Emilia.
Rome, Milan, Florence, Bologna, Turin, Naples and Venice also have hotel properties that, in certain cases, may have a more efficient alternative use.
Of course, in major tourist destinations, hotel use is often stronger because demand supports higher rates and higher occupancy. But even in those markets, there are small, obsolete, difficult-to-manage or no-longer-competitive properties.
In some cases, the hotel should be protected and relaunched.
In others, it should be aggregated.
In others, it should be transformed.
The difference lies in the quality of the analysis.
Not instinct.
Not nostalgia.
Not classification.
Not commercial storytelling.
Conclusion: the future of a hotel is not always hotel use
The former Albergo Le Notarie, converted into a 99-bed student residence, sends a clear signal.
The future of a hotel property is not always hotel use.
Sometimes the best way to preserve value is not to continue operating a hotel, but to recognize that the property can generate more income, more stability and more value through a different function.
This does not weaken the hotel sector. It makes it more mature.
Because a mature market does not defend every property regardless of fundamentals. It distinguishes between competitive assets, assets to be relaunched, assets to be repositioned and assets to be converted.
The decisive question for owners, banks, investors and operators is no longer:
“How much is my hotel worth today?”
The decisive question is:
“Which use can generate the greatest value tomorrow?”
Those who answer this question correctly protect capital.
Those who avoid it risk remaining the owners of a memory, not an investment.
Do you own a hotel, former hotel, hospitality property or accommodation asset and need to understand whether it should be relaunched, sold, leased, transformed or converted?
Through HotelManagementGroup.it, we analyze asset value, current profitability, operational sustainability, alternative-use scenarios, real estate potential and the most coherent value-enhancement strategies for the market.
For a confidential, direct and focused assessment, contact us now at info@investimentialberghieri.it.
If a hotel property is losing value, waiting is not prudence.
It is an economic decision against your capital.
Roberto Necci - r.necci@robertonecci.it
