The Revolution in Domestic

Abstract

Under pressure from strong competition and weakening demand, hotel chains have altered the formerly iron-clad terms of their management contracts. As bargaining power of owners and financial partners has increased, the length of the contracts has shortened, base fees have diminished, and incentives have become more important. Contracts are more likely to spell out the terms for ending a contract in case of weak performance. Operators are also more likely to participate in the equity of a project or make a loan. The definition of operator system-reimbursable expenses has been narrowed, and contracts are more likely to terminate upon sale of the property. Finally, contracts have spelled out more clearly the mechanisms for resolving disagreements.