Key Takeaways
- The owner owns the asset; the operator manages the business within contractual authority.
- Base and incentive fees are only part of the economic and governance structure.
- Terms vary substantially and require qualified legal, tax, accounting, and investment review.
Why It Matters to a Hotel
An HMA can govern the hotel for many years and shape operating control, employment, cash flow, capital decisions, brand relationships, and exit flexibility.
How It Works
- Define the parties, hotel, term, and operator authority.
- Allocate employee, bank-account, purchasing, contracting, and reporting responsibilities.
- Set base and incentive fee structures and reimbursable costs.
- Establish budget, capital, reserve, and owner-approval processes.
- Define performance tests, owner priority if any, cure rights, defaults, and termination.
- Coordinate brand, lender, insurance, sale, and assignment provisions.
Formula, Statement, or Decision Framework
An agreement review should map each material decision to the party with proposal, approval, execution, funding, reporting, and dispute rights. A summary never replaces the signed contract.
Practical Hotel Example
An owner wants to defer a renovation and change the annual budget. The asset manager checks the HMA, brand agreement, and lender requirements to identify approval rights, operator obligations, deadlines, and consequences before negotiating a plan.
Departmental and Role Responsibilities
- Owners provide capital and exercise reserved rights.
- Operators manage within delegated authority and report performance.
- Asset managers monitor compliance and coordinate owner decisions.
- General managers lead the property under the operator’s authority.
- Qualified counsel interprets and negotiates legal rights.
Management Agreement vs. Franchise Agreement
An HMA appoints a company to operate the hotel. A franchise agreement licenses a brand and system. A hotel may have both, may be managed by the brand, or may use a third-party manager with a separate franchise.
Common Mistakes
- Comparing only headline fee percentages.
- Assuming brand and manager are always the same party.
- Ignoring owner approval, employment, termination, sale, and lender provisions.
- Using generic definitions to interpret a specific contract.
Best Practices
- Maintain a current agreement abstract reviewed by counsel.
- Track notice, approval, test, and renewal dates.
- Model total fees and reimbursable costs under scenarios.
- Document owner and operator decisions.
Scope and Important Professional Caution
Important legal caution: this article is general education, not legal, tax, accounting, franchise, securities, lending, or investment advice. Rights and obligations come from executed documents and applicable law. Engage qualified counsel and other advisers.
Frequently Asked Questions
Who employs hotel staff?
The agreement and operating structure control; arrangements vary.
Does an HMA include a brand license?
Sometimes, but often the franchise or brand agreement is separate.
Can an owner terminate for poor performance?
Only as the agreement and law allow, often subject to defined tests, exclusions, cure rights, and procedures.
What is an incentive fee?
A performance-linked fee defined by the agreement; the profit base, hurdles, priority, and calculation vary.
Sources and Review
- U.S. Securities and Exchange Commission — Braemar Hotels & Resorts 2024 Form 10-K: www.sec.gov/Archives/edgar/data/1574085/000157408525000024/bhr-20241231.htm
- AHLA and HFTP — Uniform System of Accounts for the Lodging Industry, 12th Revised Edition: www.ahla.com/news/hftp-ahla-and-gfc-unveil-groundbreaking-12th-revised-edition-uniform-system-accounts-lodging
Last reviewed: August 2, 2026.
Editorial review: SalesHospitality Editorial Team.
Reviewed under the SalesHospitality Knowledge Standard.
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