Articles Posted in Hotel Franchise & License Agreements

29 March 2013

Hotel Lawyer on branding your hotel or running it as an independent. When should you brand your hotel and when should you leave it unbranded? How do you know when the benefits justify the costs? And if you decide to brand, should you go with brand management or an independent operator? What are the considerations?

Few decisions are more important. Here is hotel lawyer, Robert Braun to share some insights garnered by our Global Hospitality Group®’s experience in helping clients with more than 1,000 hotel management agreements and franchise agreements.

To Brand or Not To Brand
(your hotel)
by
Robert E. Braun | Hotel Lawyer

Why the hotel branding and management decisions are so important

One of the first decisions in the hotel development or acquisition process can have a lasting impact on the success of the project: whether the property should be branded, and whether that brand should manage the property. The hotel’s brand will be a defining part of the profitability, image and value of the hotel, and there may be no other decision which has a greater effect on the future of the property. Similarly, the management of a hotel can enhance the value of the brand, protect the owner, or detract from the value of the hotel — by as much as a 50% swing.

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18 July 2012

There is nothing more important to the value and financial success of your hotel than selecting the right operator, and getting a management agreement with reasonable terms.

At a recent meeting in Los Angeles, my partner and Hotel Lawyer Robert E. Braun of JMBM’s Global Hospitality Group® moderated a panel of hotel industry leaders on some of the key issues owners should consider in selecting a new hotel operator.

The panelists included Patrick Bajdek of Carlson Rezidor Hotel Group, Craig Mance, from Hilton Hotels, Rich Musgrove from HotelAVE, Larry Somma of Hyatt Hotels, and Sam Winterbottom from Grubb & Ellis.

Below, Bob gives his top 5 takeaways from the panel. . .

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12 September 2011

Hotel Lawyer with some tips on Hotel Franchise Agreements and the 5 biggest mistakes a hotel owner can make

Hotels need brands, and brands need hotels. For many years, hotel brands have been growing in importance for the success of hotels in the United States and abroad. The trend toward branding is quite a phenomenon. According to numbers we have seen, In the early 1990s, approximately 40% of the hotels in the U.S. were branded and the balance were independent. Now the number is probably closer to 80% or more of the hotels are branded or brand-affiliated.

The branding is often accomplished by a franchise or license agreement from a company owning the brand. Other times it is accomplished by a branded hotel management company entering into a management agreement with the owner of the hotel, providing both the brand and management for the property.

Although we have spent a lot of time on Hotel Law Blog discussing hotel management agreements, today we are going to focus on the franchise or license agreement arrangements. With more than 20 years’ experience working with more than 1,000 hotel management and franchise agreements, we have some perspectives that may be worth considering.

Hotel owners keep falling into the same traps
One of these perspectives of our hotel lawyers is that many sophisticated hotel investors and owners seem to fall into a handful of traps that would be easy to avoid. And this same handful of traps catches the unwary time and again.

So this article focuses on hotel franchise agreements and outlines the 5 biggest mistakes an owner can make when seeking a hotel franchise arrangement. If this sounds all too familiar, you have probably learned these lessons the hard (and expensive) way. If you haven’t stumbled on these yet, you won’t want to miss the warning flags and the traps they portend.

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8 September 2011

Hotel Lawyer on changing brand standards.

Hotels need brands, and brands need hotels.

Like all relationships, the relationship between branded hotel operators or franchise companies (the brand) and hotel owners needs ground rules. As long as both parties agree to the rules and follow them, who can complain?

Now, what happens if the ground rules change? In most relationships, both parties would agree to change the rules — or they would separate and go their own ways.

And what if one of the ground rules is that only one party can change the rules at any time? And the other party would have to follow them, no matter what? This is what can happen to hotel owners that agree, often for very good reasons, that a brand can change its standards for the hotel.

Sometimes the change in brand standards is not so good for the owner… one day you’re turning a profit and the next day you’re in the hole, paying for expensive changes required by the “new brand standards,” with no return on investment in sight.

The management or franchise agreement sets the ground rules and allocates risk between the hotel operator and the hotel owner. Negotiating the agreement, which will include “brand standards”, is one of the most important things hotel owners will ever do for their hotel investment.

Here is some advice from my partner, Robert Braun, co-author with me of the HMA Handbook.

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06 October 2010

Terminology

Contracts between hotel owners and managers (or operators) controlling the management of a hotel go by various names. They are called hotel management agreements, HMAs, hotel management contracts or hotel operating agreements. For convenient reference, this article will generally use the term “Hotel Management Agreement” or “HMA.” However all these terms can be used interchangeably and mean the same thing, just as with hotel operator or hotel manager.

Whatever they are called, Hotel Management Agreements allocate risk between the hotel manager and the hotel owner. They are critical in determining the profitability and value of a hotel.

Hotel Lawyer with a big tip on how to get a great hotel operator and a fair hotel management agreement — Why Hotel Owners Need HMA PRO™
For more than 20 years, hotel lawyers at JMBM’s Global Hospitality Group® have helped hotel owners find the best hotel operators for their properties and get fair hotel management agreements. Our clients get better results because of our experience gained in negotiating, re-negotiating, litigating, arbitrating and advising on more than 1,000 hotel management agreements and more than $87 billion of hotel transactions.

Our experience has has taught us that the traditional Request for Proposal or RFP process used to get hotel operators is too passive and ineffective. By its very nature, a “mere” RFP suggests that the owner should just wait for whatever an operator might propose, and that is simply not in the best interest of either the owner or the prospective operator.
HMA PRO™ is JMBM’s ultimate refinement of the old standby RFP. We started with the typical hotel industry RFP process still used by knowledgeable hotel consultants today, but we made some critical changes that have produced stunning results for our clients, greatly enhancing the value of the owner’s hotel.
Here’s how it works . . .

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