Hotel Management Agreements
By John Duran on June 15, 2020
Hotel Management Agreements: Creating a ‘win-win’ relationship
While the future cannot be perfectly predicted, protectants can be put into place that provides the option of a favorable choice of action. The COVID-19 pandemic has put additional pressure on hotel owners and operators, which in turn has resulted in disunity during a critical period. It is times like these, that owners and operators find the terms of their Hotel Management Agreement (HMA), which they had made clear sense at the time, did not stand the test of time.
Why is it essential for the HMA to be a win-win?
Some may call it a ‘rude awakening’, but perhaps it is more ‘trial by fire’ of the management agreement. In this report, we first discuss the importance of a ‘win-win’ HMA and why it matters. Then the pressure points of an HMA that are often highly contended such as the term, fees, centralized services, performance test, and the language found throughout most agreements. Finally, we conclude with guidance for hotel owners on the best methods to achieve a win-win HMA.
Anatomy of a Hotel Management Agreement
1. Term (Brain)
2. Management Fees (Bones)
3. Centralized Services (Muscle)
4. Performance Test (Liver)
5. Language in the Agreement (Heart)