And if the hotel management agreement is the norm, construction often varies, depending on countless variables, especially how the operator is paid for his work. The agreement between a hotel owner and a hotel company has been a recognized business model in the hotel industry for several decades, originally designed to allow hotel operators to expand their portfolios worldwide with minimal risk associated with real estate ownership. About one-fifth of all hotels in Europe and one-eighth of all hotels in North America were operated from 2015 under management agreements and, although each management agreement is unique, the same main issues are generally identified and negotiated between the parties. Negotiating a hotel management agreement (or HMA) is a complex process that is usually preceded by a negotiation of a Memorandum of Understanding or Memorandum of Understanding. “A lot depends on the location of the hotel,” Bursby said, pointing to the difference between a hotel management agreement covering one London hotel and another in the north of England. Any result that makes the hotel manager and owner more consistent is a positive trend that can find its basis at the beginning of the relationship, thanks to the terms of the management agreement. The management agreement should allow the owner to limit the operator`s ability to generate certain types of expenses that may result in increased revenue and hence a higher base charge, but may not correspond to higher profits, such as promotions.B. Good practices are designed to agree on an operating budget with expected benefits that the owner can check from time to time. The agreement contains the operator`s main general conditions, to which the hotel management package will be developed at a later date.
Despite their non-binding nature, it will be difficult to renegotiate the main conditions after the signing of the agreement. If, in this preparatory phase, it is not a matter of negotiating and solving problems, both parties may find themselves in an unfavourable situation when the package of management agreements arrives. Operators operating the hotel under their own brand will likely require the right to spend to preserve the brand appeal related to their goodwill and common operating standards. It is important to ensure that this does not become an “empty cheque” – if the group of operators decides to introduce a swimming pool in all branded hotels, the owner should not be forced to accept the construction of a new pool complex in his hotel. Hoteliers have a place in the hotel industry for a reason: good results; Many companies have good practices to increase their turnover and take cost-cutting measures. If they could not deliver, there would be no more than 100 such companies in the United States. Differences have emerged in practice between the terms and conditions of management agreements concluded in a “return to sale and management” transaction and management agreements concluded by operators on a stand-alone basis, for example with regard to a new development.