This paper will focus on the building blocks behind the hotel operating models, and will cover poorly publicised agency problems between a hotel owner and an operator, which can sometimes be devastating to a hotel investor. The agency problems are exacerbated by long-term contractual agreements which often last for 15 years or more. Hence, we like to call the operating partnership an owner-operator marriage.
By understanding the basic components of the hotel operating model and the motives of operators, you can achieve a substantially happier and fruitful relationship. Not only can an investor structure a deal which will bring him or her closer to the desired risk-return profile, but they can also drastically improve it. We will highlight some of the common problems arising from the owner-operator conflict of interest, and explain how they can be solved. ..