Hotel Management Contracts: Historical Trends

Most hotels are managed by brands or independent operators – not their owners; the owner is generally responsible for providing funding for the operation of the hotel when necessary while the operator manages the hotel’s day-to-day operation.

The agreement between the two parties is often structured with the operator as a contractor using a contract that specifies duties, obligations, and liabilities.

This article, based on findings from an analysis of over 500 management contracts collected by HVS as well as a review of publications on the topic, provides an overview of typical terms for a hotel management contract and examines historical trends observed in the industry.

The article is not meant to provide trend information on what is happening in any particular hotel management contracts currently being negotiated but analyzes aggregated data for contracts written during the past three decates in the United States.

The authors discuss provisions such as contract length, management fees, reserve for replacement, working capital, insurance, employment, dispute settlement, budgets and financial reporting, area restrictions, and early termination.

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