As a former VP of Legal at Starwood Hotels & Resorts Worldwide, Daniel Braham has worked for years with owners and third parties. Years ago, he said, getting management contracts was like shooting fish in a barrel. «The operator was able to choose who he wanted,» he said. Decades ago, the hotel owner wasn`t as experienced or demanding, «they didn`t fully understand the industry, so the operators had their say,» Braham said. While owners have become much more competent in recent years, the world`s large operators have also become larger and more powerful, especially in light of the recent consolidation and mergers and acquisitions of hotel operators in the sector, and as a result, the reduction in competition has made negotiations more difficult to negotiate with them. It is also reasonable to note that there is a move towards agreements with third-party operators. As the hotel becomes a mainstream asset and owners gain a better understanding and maturity, third parties (TPO) have the wind in their sails. This model, well established in the relatively new U.S. market in Europe, is now developing rapidly, providing more flexibility to owners and, in some cases, allowing them to shift employee responsibility to the TPO`s balance sheets. A hotel managed by a TPO is very often combined with a franchise for a major hotel brand.
Another trend is the emergence of «Manchises» and hybrid management contracts, in which hotel owners mandate a hotel company for an initial period, say three to five years, where the contract changes to a franchise agreement in which the owner assumes management responsibility and retains the operator`s brand for an annual deductible. There is no obvious change for the outside world. This is particularly beneficial in helping hotel operators introduce new brands, so that strict operational controls can be put in place in the early years that the brand is going through its «high-speed phase». If the operators still have the upper hand, the gap narrows. Some of them are due to an ever-increasing number of hotel management companies competing for a limited number of assets. This paradigm began to change after 11-11, when hotels suffered a significant decline, both for business travel and for holidays. And when the financial crisis stabilized, funding dried up and business dissipated. As a macro-event, this has hurt brands. Braham says blackstone`s acquisition from Hilton in 2007 expanded it.
(v) the right to set hotel room prices and other expenses, staff salaries and the total number of employees. The duration tends to be longer for brand management contracts – 20 years these days with perhaps a ten-year extension in the choice of the management company, perhaps conditional and without prior failure of the performance audit (see below). . . .