Negotiating the Hotel Management Contract
By Chad Crandell, Kristie Dickinson, and Fern I. Kanter
Chad Crandell is a co−founder of Capital Hotel Management (CHM), where he serves as President and operations leader of hotel investment advisory and asset management services. Since its inception, CHM has provided asset management services to investors and developers holding hotels and resorts valued at more than $1 billion and located throughout the United States. Before forming CHM, Mr. Crandell held a senior−level position at a major consulting firm. His 20 years of hospitality industry experience includes management company and franchise selection and contract negotiation, operational reviews focusing on market positioning and financial performance, and the development of hotel acquisition and disposition strategies. Mr. Crandell has held numerous positions in operations and development with InterContinental Hotels, Chalet Suisse International, and Koala Inns of America. He currently serves as a member of the board of directors of the Hospitality Asset Managers Association (HAMA). Kristie Dickinson, Vice President of Portfolio Management for Capital Hotel Management, has nearly a decade of experience in hotel operations, development, and advisory services. At CHM, Ms. Dickinson is responsible for overseeing portfolio projects, including implementing revenue−enhancement programs, conducting pricing analyses, monitoring labor productivity and market trends, and identifying profit improvements. Before joining CHM, Ms. Dickinson was a member of Doubletree Hotels Corporation’s development and franchise team. She has consulted on hotel development, positioning, management, and disposition projects, completing over 60 research assignments for a variety of hospitality−related land uses. In addition, Ms. Dickinson has been involved in numerous strategic planning studies, developing strategic plans for food, beverage, entertainment, and lodging facilities for the United States Air Force in Korea, Japan, and Germany, as well as undertaking a national growth plan for an international hotel company. Fern I. Kanter, Executive Vice President of Strategic Planning for Capital Hotel Management, has over 20 years’ experience in the hospitality and tourism industries, specializing in South Florida and international hotel markets, including the Caribbean, Mexico, and Central and South America. Before joining CHM, Ms. Kanter held senior−level positions with various international hospitality consulting firms.
Ms. Kanter’s experience includes a variety of visitor−based land uses, mixed−use resort developments, and tourism destination projects. She has consulted on master planned mixed−use resort communities, assisting in programming a variety of different land uses, including hotels and resorts, vacation ownership, golf and club programs, marinas, resort residential, and commercial uses. Ms. Kanter has also served both domestic and international hotel companies, performing due diligence for acquisition opportunities and developing market−entry strategies for international locations.
HE MANAGEMENT AGREEMENT IS the single most important contract entered into by the hotel owner. Careful negotiation of this legally binding document is critical, as it sets the rules that define the long−term relationship between the owner and operator and is referenced routinely throughout the life of the contract. This chap− ter outlines the key steps in the process of negotiating the management agreement, beginning with the selection of an operator and setting the stage for negotiations through the introduction of the owner−operator bill of rights, which establishes the desired posture of the owner with respect to the salient terms of the agreement. The present chapter was prepared based on the authors’ experience negotiat− ing hotel management contracts. We also draw on reference material from two leading authorities on the...
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