Hotel Management Agreements: Owners Often Lose Leverage Through Fine Print, Says RAR Hospitality's Bob Rauch
🏨 Hotel management agreements typically entail a base fee of 2-4% of total revenue and an incentive fee of 10-20% of cash flow above a set return. Operators often seek contracts of 10+ years, with rights to terminate only for cause. Owners are advised to negotiate terms to protect financial interests, such as realistic incentive hurdles and performance-based termination rights. Proper contract management ensures profitability and control over operations and data.
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