The "Leases vs Management Contracts" debate is a
perennial feature for panellist sessions at conferences for the
hotels' sector. For some, for tax or regulatory reasons, there
really isn't any choice – usually this means it has
to be a lease. If in the current market, there is a heightened
yield differentiation between managed and leased hotels, perhaps
(at least in the short term) Owners will favour leases, bucking
recent trends towards management contracts. In the UK, the usual
expectation is that a lease between commercial parties will be on
"FRI" terms (an Anglo-Saxon concept). This model does not
necessarily work for hotels.
It seems to me there are two reasons why this is so: first, the
operational side of the hotel business is integral to the real
estate, its value and the income derived from it (so, whatever the
rent structure a hotel lease will need specific provisions to deal
with operational requirements and the handing-back of the hotel
when the lease
