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
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.
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
- Choose the "right" brand and operator
- 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
About JMBM"s Taxation, Trusts & Estates Group
JMBM"s Taxation, Trusts & Estates Group is one of the largest and most active groups of its kind within a full-service law firm. Recognized by U.S. News & World Report / Best Law Firms® with a First-Tier ranking in the Los Angeles metropolitan area, our practice focuses on the needs of individuals and families, and their business interests. Our attorneys provide estate planning, wealth transfer planning, trust administration and the resolution of trust disputes. Our tax lawyers understand business concerns, and work closely with colleagues in the Firm"s corporate and real estate groups to ensure the tax efficiency of organizational and transactional decisions.
JMBM's Global Hospitality Group® provides business and legal advice to hotel owners, developers and investors, based on practical experience gained from more than $71 billion of hotel transactions, 1,000 hotel management agreements, 1,000 franchise agreements, and 3,800 properties worldwide. The Chinese Investment Group™ within the practice is a dedicated team of hotel and real estate lawyers that provide a gateway for Chinese investment in the United States. The Group and its network of reliable professional resources help Chinese investors identify, analyze, evaluate, validate, acquire, finance and manage hotel and real estate opportunities. We have closed more than $1.5 billion of EB-5 financing for our developer clients and sourced more than half of that.