Hotel Management Agreement Negotiations - The Issues Taking Up Time and Generating Angst
This edition's issue:
So what's all the fuss about running an operator selection process? Thoughts for owners and operators to achieve a winning strategy
During the course of a negotiation in relation to a hotel management agreement (HMA) there are many issues to be identified, negotiated and resolved. Some issues seem to come up more regularly than others and seem to take a disproportionate amount of time to deal with to the satisfaction of both owners and operators. In this series we will focus on a number of issues which fall into this category.
In previous editions of the newsletter in this series we have dealt with:
In this edition we take a somewhat different tact. Increasingly we are observing owners going down the path of an operator selection as opposed to conducting negotiations with only a single operator.
Like most other aspects of hotel management agreement negotiations, thought needs to be given by both operators and owners to each stage in the selection process. From an owner's perspective an operator selection can be significantly more time consuming and costly than a single operator negotiation. There is also the risk that the owner and its advisers can "lose sight of the forest for the trees" and make significant decisions based on relatively insignificant matters with the result that the best operator for the particular opportunity may not be selected.
Operators need to be mindful of the impact of competitive tension and the realisation that the true adversary in such negotiations in all likelihood is the group of other potential operators - as opposed to the owner. Furthermore, an operator selection should give an operator who may not be "front of mind" for a particular opportunity the chance to participate in the process and ultimately demonstrate through sheer determination and enthusiasm that it is in fact the best operator for such opportunity.
Since we are based in Australia, we will approach the questions below from a broadly Australian perspective. However, the good news is that we have 17 offices in Asia Pacific and many more around the world to answer any jurisdictional specific questions that may arise from the discussion below.