Hotel Management Contracts Sample
If a hotel owner does not wish to manage their own hotel, they must draft up a contract using a hotel management contracts sample.3 min read
2. An Overview of a Hotel Management Contract
3. What Details Should be Included in a Hotel Management Contract?
Updated November 3, 2020:
If a hotel owner does not wish to manage their own hotel, they must draft up a contract using a hotel management contracts sample. For a number of different reasons, many hotel owners simply do not wish to actually manage the day to day responsibilities of the hotel business. They might not have the right set of skills, but want to hire someone who does. This is where a hotel management firm steps in. If the hotel owner wants to hire a management firm, a hotel management contract will be needed.
A hotel management contract is a legally binding agreement between the hotel owner and the management firm. It should set forth both party’s expectations, responsibilities, and duties. The term sheet should include all necessary provisions related to the exchange of services that explicitly documents the agreement.
Historical Trends in Hotel Management
One of the reasons why hotel management contracts are becoming more and more common is because of the trend of hotel owners delegating most of their responsibilities to management firms. More and more frequently, hotels are being run by franchisees or independent operators as opposed to the actual owner of the hotel. The hotel owner is now thought of as more like an investor of the hotel as opposed to its manager. Many hotel owners have little to no experience running a hotel, and that is why they delegate it to a firm that has expertise in the hotel management industry.
An Overview of a Hotel Management Contract
The hotel management contract should describe the relationship between the hotel owner and the management firm. The management firm has the responsibility of managing the day to day operations of the hotel, which typically includes hiring and firing employees, dealing with customer service, managing each division of the hotel, etc. The management firm will also be in charge of maintenance, marketing and advertising, and promotion.
The details of the management firm’s responsibilities should all be explicitly described in the hotel management contract. There will likely be negotiations taking place back and forth between the hotel owner and hotel management firm until they both agree and are satisfied with each other’s positions. Once this happens, those duties should be written down in the contract as finalized.
If either of the parties wants to modify the contract at a later date, they are able to do so as long as both parties agree to the modifications. To properly amend the contract, both parties need to document the change in writing, sign, and date the document and then attach it to the original contract.
What Details Should be Included in a Hotel Management Contract?
While different hotel management contracts may stipulate different things, there are some basic requirements that every contract should contain:
- Names of the parties to be bound. The hotel management contract should include the names of the hotel owner and the hotel management firm. It should describe the location of the hotel and whether or not it is independently owned or part of a franchise. It should also include any other relevant descriptive information about the parties.
- Length of contract term. The contract should stipulate how long the working relationship between the hotel owner and the hotel management firm will last. Any contract with a term of one year or longer must be in writing. This section can also include an option to renew the contract if both parties wish to do so.
- Responsibilities of both parties. Arguably the most important part of any contract, the document must explicitly describe in detail the responsibilities and duties of the hotel management firm, as well as the expectations placed on the hotel owner.
While the hotel owner provides the funds to keep the hotel running, most of the other duties will fall on the management company. These responsibilities include:
- Overseeing employees
- Preparing budgets
- Supervise hotel daily operations
- Ordering hotel inventory
- Customer service
While most of the duties fall on the hotel management firm, the contract should also outline the hotel owner’s responsibilities, such as making sure the hotel complies with relevant laws, keeping the hotel financially stable, and maintaining insurance.
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