The hotel entrepreneur (franchisee) signs a franchise agreement with a hotel brand (franchisor) to operate the property under a franchise agreement for a franchise fee. Hotel owners or tenants create their own team or commission an independent operator to manage their hotel operations, with whom they enter into an operator contract. The landlord usually receives a fixed rent, which is usually subject to regular review and an agreed interest rate index. Banks and institutional investors prefer leasing contracts to other hotel operating models because they provide stable cash flow and a secure return on investment. The landlord leases the property to the tenant under a commercial real estate lease usually for 20 years or more for a fixed rent. The owner is usually responsible for the maintenance of the property, while the tenant is responsible for managing the hotel business and staff and bears all operational risks. Hotel franchiseThe hotel franchise is an agreement between a business owner under which hotel properties are operated under a hotel chain franchise agreement. The franchisor`s brand, distribution channels and intellectual property are used by the business owner – owner or tenant – to exploit the property while retaining risk, responsibility and control of the property. Operating expenses are paid by the business owner to the operating company for the administration of the hotel, which are usually composed of the basic management fee, incentive fee, and other fees and/or refunds.
The hotel owner usually requires that the agreement include a performance test when non-compliance with GOP and/or RevPAR measures gives the owner the right to terminate. The owner is usually responsible for the hotel`s assets, including the maintenance of the property, furnishings, equipment and equipment (FF&E) and inventory, as well as the financing of the hotel`s bank accounts. As a rule, the hotel contractor is also the employer of the hotel staff and is therefore responsible for all claims of the employee. Operations control refers to the right of the business owner to approve budgets, key personnel, contracts, etc. The ability of operators to manage hotels must be balanced with the owner`s ability to approve important or critical issues. While an operating company can offer both a hotel management agreement (HMA) and a franchise to the business owner, these are separate agreements. They offer two different services, although legal documents can be combined. The asset reduction strategy of hotel brands of reducing the portfolio of properties in favor of lighter portfolios is often achieved through franchising. It allows hotel companies to grow their businesses with limited capital requirements and focus on fee revenues and expense margins. The tenant has unlimited rights to sublet parts of the premises and extended transfer rights.
As part of a hotel rental agreement, the owner of a hotel property rents it to the tenant, who uses it to manage his hotel business. The owner (owner) has no control over the operation of the property and assumes no risk and no responsibility for the operation of the hotel. The lease also includes a variety of operating clauses for the tenant. A Manchise contract is an operating agreement with a hotel brand operator that includes an option to convert it into a franchise once the hotel entrepreneur has developed enough skills and knowledge to take over the operation of the hotel. After the initial phase of traditional hotel management, the contract returns to the brand`s franchise agreement, thus reducing the fees payable to the operator in the later phase of the operating period. Common issues in negotiating real estate leases include expansion/construction issues when the premises are turnkey or expanded by the tenant, capital expenditures and repairs. The landlord or tenant owns the furniture and appliances and assumes insurance for business interruption protection and compensation for personal injury or negligence claims. This lease agreement allows the tenant to build a hotel on land owned by the owner. The tenant is responsible for all taxes, utilities and construction costs. The rent is set for the first five years of the term and then adjusted by the CPI. This form is intended for the rental of a hotel that was previously operated by the owner to a new tenant operator. The lease is a percentage of rental, and all sales from hotel activities, including room revenue and food and beverage income, are included in the definition of gross revenue, among other things.
Hotel management agreementsUnder a hotel management agreement (HMA), a hotel chain or independent management company operates a hotel business on behalf of the business owner for a fee. As a rule, intensive negotiations are conducted in order to determine the respective rights and obligations of the customer and the operator. Termination rights are contractual provisions that allow the contracting parties to terminate the contract. This includes termination for infringement, without giving reasons and when selling the property. Sale-leaseback (SLBT) transactions have led to the “sandwich model”, where an operator is hired to operate the property for the tenant, the tenant receives the operating profit/loss, and the landlord receives payment for the lease as part of a lease guarantee. Sales and management are used to realize the asset-light strategies of developers and chains for the sale of assets. .