Student name: Tuan Dung Huynh (Frankie)
Student ID: HUY10204004
Lecturer’s name: Lynn Richardson
Tutors name: Andrew Carruthers
Subject: Hotel and Resort Operations
Since the advance of transportation let people can travel more regularly and easily, it also affects to the development of hospitality and tourism industry. In the recent decades, the hospitality and tourism industry are playing the vital role in the social life, especially is hotel and resort industry. However, there are some challenges that hotel and resort have to face. Normally, the hotel owners and management companies are not separated and agreements are made between hotel owners and hotel operator. Nonetheless, the full risk of economic remains with the owners under a management agreement, while the management companies is responsible for the hotel operation. This problem led to the conflict of management companies and hotel owners when the standard measurement tool (balanced scorecard) showed that the hotel and resort industry has become under line. This essay will discuss about the inherent argument between hotel owners and hotel management companies under hotel management agreement.
Firstly, the hotel owners usually feel it difficult to agree that hotel management companies are entitled to receive the payment of management even the hotel is running at the below of profit or the hotel owners don’t have enough ability to pay the liability out of the cash flow earned by hotel. As the result, the priorities of owner normally require that the encouragement payment (the part of management fees is reckoned as the proportion of profit) is only paid when the hotel accomplished the certain plan of profit. According to “management agreement trends worldwide” (Jones Lang LaSalle Hotels 2001), the average base fee in Europe is around 1.8% of gross profit and average encouragement payment is nearly 7% of gross operating profit (GOP). Therefore, in the consideration of...