This article covers the types of fees an investor should dissect before acquiring a franchise hotel and signing a hotel management agreement. We will explain (i) how franchise and management fees change depending on the type of an operator, (ii) why low fees can be bad, (iii) model the fee impact on the cash flow of an investor, and (iv) demonstrate the positive difference on the bottom-line by running an in-house hotel management team.
Hotel management fees are paid to a hotel operator in exchange for running the hotel to maximise the returns on the owner’s investment. However, due to the inherent conflict of interest between the owner and a third party operator, the investor needs to review and renegotiate the wide range of terms to maximise the chances of achieving their objectives...