Freehold, or otherwise, ownership sits with the owner – no change
No Lease is created
The term is typically 25 years but can be any length with break options*
The owner typically enjoys an income depending upon the financial performance of the hotel less the fees of the management company.
The hotel is maintained by the management company through the trading account with major repairs typically requiring capital from the owner
The condition of the hotel at the end of the term will be dependent upon the maintenance regime (FFE reserve) – no dilapidations are applicable
The owner’s income is totally dependent upon the performance of the hotel providing opportunities to achieve better returns than those of a traditional lease.
The management contract will likely have performance clauses giving the owner flexibility to review.
The management fees are usually based on a percentage of revenue and an incentive. These will be in addition to any Franchise fees payable if a Franchise is selected.
*Exact terms will vary