Dubai, UAE · Written by George Stoyanov, Platform Chairman · 7 min read
Most Hotel Management Agreements get read closely once, during negotiation, and then rarely again until something goes wrong. The clauses that matter most are often not the ones that got the most attention at signing.
The HMA Is a Living Document, Not a Signing Formality
A Hotel Management Agreement sets the terms for a relationship that typically runs ten, twenty, sometimes thirty years. Over that time, performance shifts, brand standards evolve, and the market conditions the agreement was written for change entirely. The clauses that protect an owner’s interests are the ones that still function years later, under conditions nobody anticipated at signing.
Clauses Owners Commonly Underweight
Performance Tests
Many HMAs include a performance test allowing termination if the property underperforms a defined benchmark. The detail of how that benchmark is set, and how competitive set properties are chosen, often matters more than the existence of the clause itself.
Competitive Set Definition
The competitive set used to benchmark performance can be updated by the operator over time. Without a defined review and approval process, an owner can find their property being measured against a set that no longer reflects reality.
FF&E Reserve Mechanics
The percentage and timing of Furniture, Fixtures and Equipment reserve contributions affects long-term capital planning. Ambiguity in how unspent reserves carry forward, or how they’re calculated during renovation years, creates recurring disputes.
Incentive Fee Structure
Incentive fees tied to gross operating profit can create incentives that don’t fully align with the owner’s interests, particularly around discretionary spending near the end of a reporting period.
Termination and Transition Rights
Beyond the headline termination triggers, the mechanics of a transition — staff, systems, data, and brand de-identification — determine how disruptive a change in operator actually is.
Approval Rights Over Budgets
The line between operator discretion and owner approval on annual budgets and capital plans is often less clear in practice than the contract language suggests.
“Owners tend to focus heavily on the management fee percentage during negotiation, because it’s the easiest number to compare across proposals. The clauses that actually cost money over the life of the agreement are usually somewhere else entirely.”
— George Stoyanov, Platform Chairman
Why These Issues Surface Years Later, Not at Signing
At signing, both sides are optimistic and the relationship is new. Ambiguous clauses don’t matter yet because nobody is testing their limits. Years later, when performance softens or a renovation cycle approaches, the same ambiguity becomes the basis of a genuine dispute — at which point renegotiating from a position of goodwill is much harder than it would have been at signing.
When to Review an Existing Agreement
- Before a renewal or extension decision — The negotiating leverage to fix ambiguous clauses is highest before you’ve committed to another term.
- When performance softens — Understanding exactly what a performance test clause allows, before you need to rely on it, changes the conversation with the operator.
- Ahead of a major capital cycle — FF&E reserve mechanics and capital approval rights matter most precisely when you’re about to use them.
- When ownership changes — A new owner inheriting an existing HMA should understand exactly what they’ve taken on, not assume the previous owner’s interpretation was correct.
- Periodically, regardless of a trigger event — Brand standards and market practice evolve. An agreement that was market standard a decade ago may no longer be.
An Independent Review Changes the Conversation
An HMA review isn’t about assuming bad faith on the operator’s side. It’s about understanding, in plain terms, what the agreement actually allows and requires — so that if a dispute does arise, the owner isn’t interpreting ambiguous language for the first time under pressure.
Time to Review Your Hotel Management Agreement?
We conduct independent HMA reviews covering management fees, performance tests, FF&E reserves, and owner approval rights.