Industry Update
Opinion Article 9 December 2013

Hotel Lawyer: Surge of activity creates new management agreement opportunities

Hotel Lawyer on the jump in hotel development and investment activity

By Jim Butler, Chairman, JMBM’s Global Hospitality Group

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These are getting to be pretty exciting times to be in the hotel business. Hotel industry fundamentals have continued to improve since the Great Recession and none of the experts see a particular event or reason that fundamentals will stall. Although occupancy growth rate is slowing in some sectors, ADR growth generally continues to drive greater profits to the bottom line.

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All this activity creates "management agreement opportunities"

New development is finally coming back, and 2014 may be a break-out year for long-delayed projects. The volume of purchase and sale transactions continues to grow. And owners or investors are seeking to maximize hotel value by repositioning existing assets.

The confluence of these factors is creating a lot of hotel management agreement opportunities for hotel brands, operators and owner/developers. The 2 most important things affecting the value of your hotel

In the midst of all this activity, hotel developers and investors should remember that two of the most important things they can do with their hotel asset are to

  1. Choose the "right" brand and operator
  2. Negotiate a management agreement that preserves a reasonable amount of value, control and flexibility

And . . . get practical guidance on these issues from experienced veterans representing your interests (and only your interests) at the earliest possible time in the process.

New White Paper on short term management contracts In case you missed it, Hotel Management recently published an excellent white paper that is highly relevant to all of these hotel management agreement opportunities. The article is called,"The Evolution of Short-Term Management Contracts". Click here to download a PDF of the article.

This white paper discusses the benefits of the short-term management agreements offered by third-party management companies such as that of our client, Hostmark Hospitality Group. (The white paper includes photos of Hostmark-managed properties including the 521-room Holiday Inn Chicago-Mart Plaza Hotel, the 239-room Embassy Suites Irvine-Orange County Airport, and the 176-room Lake Eve Resort in Orlando.)

The white paper also quotes my partner Robert Braun and me, and refers to our major reference work on hotel management agreements – HMA Handbook - Hotel Management Agreements for Owners, Developers, Investors & Lenders.

The HMA Handbook's 3 parts provide extensive information on the following subjects:

Part 1: How to get a great hotel operator Part 2: What you need in your HMA Part 3: How to terminate an HMA

Also included in the white paper is the full text of my article, What Marriott v Eden Roc Means for Terminating Management Agreements.

In this important case, an appellate court ruled that a hotel owner can terminate a long-term hotel management agreement with its operator even when the contract expressly provided to the contrary and waived any rights of termination.

More information about hotel branding and management

The right hotel brand and management agreement can be the difference between success and failure of a hotel. JMBM's Global Hospitality Group® has negotiated, renegotiated, litigated and advised on more than 1,000 hotel management and franchise agreements all over the world. To see how we help clients in this arena, please click here to see our brochure. (See particularly pages, 8,9, and 11).

We also have a rich library of free resources available on most topics of interest to people dealing with hotels. These are all available at www.HotelLawyer.com.

For blog articles, scroll down any page of HotelLawyer.com and look on the right side. For example, you can see all the blog articles on "Hotel Franchise & License Agreements" by clicking that link. The same goes for "Hotel Management Agreements" or any other subject you see listed down the right hand side of HotelLawyer.com.

You will also find our free handbooks on HotelLawyer.com under the "Resource Center" tab, such as

The HMA Handbook, Hotel Management Agreements for owners, developers, investors and lenders

Lenders Handbook for Troubled HotelsHow to Buy a Hotel Handbook

Jim Butler

Jim Butler is a founding partner of JMBM, and the founder and chairman of JMBM’s Global Hospitality Group® and Chinese Investment Group™. He is recognized as one of the top hotel lawyers in the world and has authored or co- authored The HMA & Franchise Agreement Handbook, How to Buy a Hotel Handbook, and The Lenders Handbook.

    More from Jim Butler

    About JMBM's Global Hospitality Group®

    The hospitality attorneys in the Global Hospitality Group® of Jeffer Mangels Butler & Mitchell LLP comprise the premier hospitality practice in a full-service law firm, and the most experienced legal and advisory team in the industry. Our team of seasoned hotel lawyers has more than $87 billion in hotel transactions experience, involving more than 3,900 properties located around the globe providing one of the most extensive virtual data bases of market terms for deals and financings. Click here to see How JMBM's Global Hospitality Group® Can Help.

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    Jim Butler
    Phone: +1 310 201 3526
    Fax: 310.203.0567
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