Long time readers of this newsletter will be aware that we tend to pick a topic and then discuss ten issues relevant to it. Why ten issues? No particular reason. It has just evolved that way.
In this newsletter we are going to use the concept of "ten" in a somewhat different way.
In our experience, irrespective of wherever in the world we are negotiating hotel management agreements, it is common practice that it comprises substantially more than ten pages and numerous annexures. Everybody agrees that management agreements should be shorter but nobody yet seems to have become sufficiently comfortable with the concept to actually put one into the market or seriously discuss it as a possibility.
So let's assume that we have been instructed by an innovative client to prepare a hotel management agreement that must not be more than ten pages (normal print size of course !), excluding essential annexures. The question then becomes - can it be done and if so what would it need to contain?
We consider that it can be done and set out below our thoughts on suggested contents. Views of course will differ on what we have indicated to be necessary inclusions as well as omissions which currently are contained in the vast array of standard templates currently in circulation. We welcome that debate.
Our views on what a 10 page hotel management agreement should contain
Click here to view table.
In our view it is feasible to contemplate the prospect of a ten page hotel management agreement.
Some provisions commonly found in management agreements are not referred to above. For example there is no non-compete provision. We would argue that the rationale and practical benefit of such a provision has passed and therefore it is not required to be included in the above.
Equally we would argue that all currently utilised performance based tests are in practice very difficult to enforce so we also do not see any point in including such provisions.
Imagine the competitive advantage that an operator would have using such a document when all other potential operators are using template documents which are far more voluminous and complex. The document could also be drafted in a "plain English format" facilitating easy reading by everybody who needs to understand the contents of the document - not just the lawyers - which would be very different from the legalise drafting we see today in most template hotel management agreements.