|| Author: Duncan Riley|

Clauses In Hotel Management Agreement

Affiliations with hotel marketing organizations are becoming more popular and sought after. Most of these hotel marketing organizations (also known as Consortia Hotel Companies) are headquartered in Europe and the United States. examples; The best hotels in the world, Preferred Hotels & Resorts, Relais & Chateaux, Historic Hotels of America, Small Luxury Hotels of the World, etc. Definitions: A hotel management contract is defined as an agreement/contract between a management company (operator) and a property owner, with the operator taking responsibility for the management of the property by providing instructions, supervision and expertise through established methods and procedures. The operator operates the hotel on behalf of the owner for a fee on the terms negotiated with the owner. If the hotel is a new building, the owner should have the right to terminate the management contract if, for any reason, the hotel is not completed without compensation to the operator. The owner will not want to micro-manage the operation of the hotel, but should be able to control the costs and expenses incurred and manage them in appropriate circumstances to obtain the return on his investment. The operator should prepare, deliver and adhere to the operating, capital and FF&E budgets approved by the owner. Flexibility in adapting these budgets to changing circumstances should be considered. The owner will want to negotiate the terms of the agreement and strike some balance by giving the owner rights and remedies if the hotel business has financial problems. The leeway to balance a hotel management contract may depend on the hotel`s fascination with the operator – if it`s a reputable hotel in a good location, the operator will be more likely to negotiate. In the case of a hotel rental agreement, the hotel company leases the property to the owner of the land and manages the hotel as a separate entity, separate from the owner of the land. In this way, the hotel company (the tenant) reserves all the income of the hotel and pays a fixed rent and, in some cases, a certain percentage of the proceeds of the sale to the lessor.

Performance testing allows an owner to terminate the management contract if the operator does not meet the agreed performance criteria after the start-up phase for stabilisation (the test phases usually start in the third or fourth year). . . .

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