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Typical Hotel Management Agreement Terms

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. Continuity of operations in the event of termination is important and the management agreement should provide for a smooth transition at the end or expiry. Our global legal practice is highly experienced in all sectors of hospitality and leisure and advises hotel owners, developers, lenders and many hotel and recreational leaders in all aspects of their business. Through our extensive international platform of lawyers, we are able to offer a coordinated legal service that meets all aspects of our clients` legal needs, from the development of a single commercial hotel to the acquisition of hotel portfolios with multiple jurisdictions. Our track record in the hospitality and leisure sector has not only given us an overview of the often complex legal requirements of the sector, but has also allowed us to develop a deep understanding of the economic and practical aspects of our clients` business. Our global subsidiaries provide you with the skills and experience you need in this growing and diverse industry. Even if the operator manages the hotel on a daily day, the residual liability of the owner should be taken into account.

If the operator acts as agent for the owner, the owner should receive compensation to ensure that the operator exceeds its authority or otherwise assumes liability to the owner without justification. 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. There are many other options for management companies` fees and allowances, such as booking fees, bonus fees, staff training fees, technical service fees, optional purchase programs, refunds of brand marketing fees and other programs for which the management company charges all managed hotels.

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