Hotel Management Contracts—Past and Present

Abstract

Conceived as a relatively simple arrangement that allowed international expansion by hotel chain operators without the risk of real estate ownership, the management contract has become an intricate and nearly essential element of the contemporary hotel industry. While trends in management contracts have shifted with the relative bargaining power of owners and operators, the key to a successful contract is aligning the interests of all parties. Owners seek some reasonable guarantee of cash flow, while operators need assurance that they will be able to benefit from their continued operation of a property. In place of a single document, management contracts now include numerous concurrent agreements that address such matters as real property rights; intellectual property rights; hotels as financial assets; hotels as operating businesses; and the needs of owners, operators, and lenders.