Five clauses to check before signing a hotel management agreement

Hotel management agreements often run for twenty years or more, and most of the owner's leverage exists only before signature. These are the clauses we negotiate first, and the ones owners most often regret leaving to standard terms.

Performance test

Make it a real test: a clear benchmark against a competitive set, measured over two consecutive years, with a cure right the operator can use only once. A test the operator can always cure is not a test.

Termination on sale

Agree the cost of ending the contract if you sell the hotel, and fix it as a formula in the agreement. Buyers discount assets that come with an operator they cannot remove.

Key money and fees

Key money is a loan in all but name if it must be repaid on early termination. Read the repayment schedule together with the incentive fee, which should be paid only after the owner's priority return. Budget approval and the owner's consent rights complete the five; we cover them in a separate note.