Management Contracts

While new hotel owners can leverage the skills they developed from a different business arena, operating a hotel without previous experience is no easy task. As such, many first-timers opt to partner with management companies to help guide them through the initial setup of the hotel’s processes, as well as build a strong model for the day-to-day operations. Then, in time, the new hoteliers synthesize what they know with what they learn to develop their own management strategy based on what works best for them.

Creating a mutually beneficial management contract should be a top priority for those just entering the industry, according to Gerry Chase, president and COO of hotel management and development company New Castle Hotels & Resorts. “It is extremely important that both sides sit down and talk about their expectations candidly and form a good relationship right away,” Chase says. “Otherwise the relationship can sour, especially when the hotel owner is still green.”

A good management company should be able to acclimate new owners to the industry, guide them through the barriers associated with hotel ownership, and provide honest feedback about each project. This can be accomplished through creating a straightforward and easy-to-understand term sheet that describes the key elements of the management contract before anyone signs any legal paperwork. “This will help ensure that the management company is able to deliver on the owner’s expectation,” Chase notes.

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Kate Hughes, Editor, LODGING Magazine