Major Issues In Hotel Management Agreements

Managing hotels and associated leisure facilities will inevitably give rise to a wide range of complex commercial and legal issues. In this article, we examine a few high level topics.

Operator v Owner

A major international hotel operating company will possess a highly sophisticated understanding of the provisions of its standard hotel management agreement and more importantly, the consequences of these provisions at both the corporate and operational levels. Particular examples are provisions dealing with fee structure, including centralized services, saleability, insurance and, most importantly, termination.

On the other hand, the knowledge of an owner of the agreement is likely to be limited. In other words there is often a large knowledge gap between the operator team and the owner team about the industry conventions and specific terms that underpin management agreements. For example, it maybe necessary to explain to owners that engaging an operating company