In today`s operating environment, profits are under constant pressure because things like work are not harder to find, but become more expensive, resulting in an erosion of profit margins. The question is: do hotel management agreements need a rejuvenation cure? More specifically, does it justify a further transfer of revenue-related agreements to those that further reduce the remuneration of operators on the basis of profits? After the acquisition, Hilton continued to do business at a steady pace to stimulate growth and sometimes conceded management agreements to the negotiating table. According to Braham, this has meant that other companies also need to be more flexible. “It tipped the scenario,” he said. Jones added: “When the financial crisis hit, some brands agreed to work on the numbers.” And if the hotel management agreement is the norm, construction often varies, depending on countless variables, especially how the operator is paid for his work. Operators generally prefer long start periods and several long extension periods that can be exercised by the operator. The owner may prefer a shorter term without specific renewal fees – if the hotel is a success, renewal is in the interest of both parties. Even if the operator manages the hotel on a daily day, the residual liability of the owner should be taken into account. If the operator acts as agent for the owner, the owner should receive compensation to ensure that the operator exceeds its authority or otherwise assumes liability to the owner without justification. In 1963, the hotel`s management agreements were drawn from an amended lease agreement for the Hong Kong Hilton, and most HMAs still support the main conditions it contains. Today, all the major chains have expanded to some extent nationally and internationally through a combination of franchise and management, and all have their own “form” or template agreements. In summary, in recent years, we have seen that the trends observed following the financial crisis of the last decade have evolved.
In many markets, the onset of the recession has made operators less risky. Traditionally, HMAs were a way to limit operators` exposure to fixed rents when incomes declined. In less developed markets such as Romania and the United Arab Emirates, operators continued to use PDOs in this way, despite some economic recovery. In more developed markets such as Spain and the United Kingdom, we have seen increasing complexity of agreements, which is why owners are becoming more proficient and looking for more control and input for the operation of their hotel, although owners continue to take the share of the greatest commercial risk in development. Hotel management contracts often involve a disruption agreement. This is an agreement between the hotel operator, the owner and the owner`s lender.