Legal Issues In Hotel Management Agreements

Cross-operations: Some hotel management agreements provide that the operator has the right to make rooms available to members of his affiliated timeshare club when the hotel occupancy for a given period is less than a minimum. These fees must not be paid by the owner, except in the case of incidental costs. It is necessary to create an environment in which owners and operators receive a fair return on their respective contributions. If not, there will be increasing opposition to such leverage. Two of the main objectives of the agreement are clearly to exempt the owner from running the business and to give the operator the rights, powers and powers he needs to carry out the transaction. However, these rights should not be unverified and an owner (even an owner seeking “easy contact” with control) should always seek to provide adequate protection. These safeguards may vary depending on the type of activity of the hotel, but generally include: most hotel management agreements now link the owner`s investment requirement to the operator`s brand standards. However, there are difficulties in practice. For a considerable number of brands, the relevant brand standards are imprecise. 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 owner would prefer that the hotel staff be employed by the operator, but this is rarely feasible. The operators defend the opposite position, with another as vis-à-vis the manager. If hotel staff are employed by the owner, the owner should deduct reasonable compensation from the operator to protect against liability for staff resulting from mismanagement of the employer-employee relationship. Such agreements bind the financier in the event of a default on the part of the operator or owner and the financier takes over the hotel in accordance with the terms of the hotel management contract. Owners may fall into the trap of making assumptions about the extent of the operator`s liability. The operator will endeavour to minimize its responsibilities and impose additional costs for ancillary services that the owner has wrongly accepted as part of the operator`s proposed package as part of the entire package. The management agreement may allow the operator to charge the owner for additional fees for these “chain services,” but these should be limited to services that can be provided more efficiently for the entire group of hotels maintained by the management company and not on the basis of one hotel per hotel.

The owner should ensure that all hotels that benefit from these services pay fairly for them. An agreement between the owner, the hotel operator and the owner`s credit bank, under which the bank agrees that the bank will retain HMA if the owner is late in his loan and closes the bank. As a general rule, the bank has the right to intervene and cure an owner`s failure after the HMA. For example, it may be necessary to explain to an owner that the obligation of an operating company does not mean that the owner is not responsible for the losses that the hotel may make during the duration of the administrative agreement. Most of the time, the hotel can only be sold under the existing hotel management contract. Until now, the payment was generally a multiple of the annual administrative tax (usually two to three times). The abbreviation of room revenues per available room, i.e. the hotel`s gross room receipts divided by the number of nights available (which corresponds to the average daily rate multiplied by occupancy).

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