Hotel Lawyer on the jump in hotel development and investment activity.
These are getting to be pretty exciting times to be in the hotel business. Hotel industry fundamentals have continued to improve since the Great Recession and none of the experts see a particular event or reason that fundamentals will stall. Although occupancy growth rate is slowing in some sectors, ADR growth generally continues to drive greater profits to the bottom line.
All this activity creates "management agreement opportunities"
New development is finally coming back, and 2014 may be a break-out year for long-delayed projects. The volume of purchase and sale transactions continues to grow. And owners or investors are seeking to maximize hotel value by repositioning existing assets.
The confluence of these factors is creating a lot of hotel management agreement opportunities for hotel brands, operators and owner/developers.
The 2 most important things affecting the value of your hotel
In the midst of all this activity, hotel developers and investors should remember that two of the most important things they can do with their hotel asset are to
- Choose the "right" brand and operator
- Negotiate a management agreement that preserves a reasonable amount of value, control and flexibility
And . . . get practical guidance on these issues from experienced veterans representing your interests (and only your interests) at the earliest possible time in the process.
New White Paper on short term management contracts
In case you missed it, Hotel Management recently published an excellent white paper that is highly relevant to all of these hotel management agreement opportunities. The article is called, "The Evolution of Short-Term Management Contracts". Click here to download a PDF of the article.
This white paper discusses the benefits of the short-term management agreements offered by third-party management companies such as that of our client, Hostmark Hospitality Group. (The white paper includes photos of Hostmark-managed properties including the 521-room Holiday Inn Chicago-Mart Plaza Hotel, the 239-room Embassy Suites Irvine-Orange County Airport, and the 176-room Lake Eve Resort in Orlando.)
The white paper also quotes my partner Robert Braun and me, and refers to our major reference work on hotel management agreements -- HMA Handbook - Hotel Management Agreements for Owners, Developers, Investors & Lenders.
The HMA Handbook's 3 parts provide extensive information on the following subjects:
Part 1: How to get a great hotel operatorAlso included in the white paper is the full text of my article, What Marriott v Eden Roc Means for Terminating Management Agreements.
Part 2: What you need in your HMA
Part 3: How to terminate an HMA
In this important case, an appellate court ruled that a hotel owner can terminate a long-term hotel management agreement with its operator even when the contract expressly provided to the contrary and waived any rights of termination.