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|1. Are Hotel Management Agreements (“HMAs”)
common in your jurisdiction?
|2. If not HMAs, what are the alternatives/what is
||As well as HMAs, owners choose hotel franchise/long
|3. Is it common or usual for the HMA to be
governed by (i) local laws; (ii) the laws of one of
the parties’ country of incorporation; or (iii) an
||HMAs in Romania are usually governed by English law.
|4. Are there any significant or unusual points to
note in respect of tax on HMA payments in
Term and Termination
|1. Is there a standard contract period of an HMA?
||HMAs for branded operators tend to be for long
periods (10–20 years).
|2. Is the term usually fixed? Are early exit or similar
options included (contractual or implied)?
Yes, usually the term of an HMA is fixed.
However, the HMA may be terminated early by the
owner/operator in case of breaches of the other
party’s material obligations – such breaches are usually
expressly mentioned in the HMA.
The owner may also have the right to terminate the
HMA early for material underperformance compared
to a competitive set of hotels of the same size/type.
|3. Is it usual to include fees/liquidated damages for
||Exit fees for early termination (break option), other
than due to operator default, are common. The level of
fees can vary widely depending on a number of issues
(e.g. location, brand, scale).
|4. What is the usual position in respect of renewal?
||This varies between different operators. Usually
HMAs will be extendable in tranches of 5 or 10
years. This can be mutually agreed or automatically if
neither party notifies the other party of the contrary.
|1. Is there a standard fee structure for HMAs (e.g.
base + incentive)?
||Fee structures vary between operators. The standard is
a base fee calculated on revenues and an incentive fee
based on profits.
|2. What other fees and charges are there (such
as royalties, accounting, marketing, licence fees,
||Sales and marketing costs, accounting charges,
purchasing costs, and license/franchise fees. These are
often set as a percentage of rooms’ revenue, and
typically range from 1–3 percent of gross room revenue.
|3. Are owners typically required to set aside funds
for fixtures and fittings?
||An FF&E Reserve is very common – it usually varies
between 2–5 percent of the total revenue.
Performance and Operations
|1. What is the usual standard imposed on an
operator in respect of the operation of the hotel?
||Contractual performance standards vary between
operators, type of hotel etc. Some HMAs do not
contain specific standards (because fee structures often
mean owner and operator interests are aligned), whilst
others impose the operations standards of the brand.
|2. What performance measures are commonly
used in your jurisdiction?
||The performance test used in our jurisdiction is that of
measuring the GOP (Gross Operating Profit) achieved
for an operating year with the pre-agreed percentage
of GOP. In practice, there are other performance
tests used, such as AGOP (Adjusted GOP) or EBITDA
(Earnings Before Interest, Taxes, Depreciation and
|3. Is an operator or owner guarantee common in
||For branded operators, an operator guarantee would be
unusual. However, this may vary on a case by case basis.
|4. What is the usual position in respect of
employees? With whom does the liability for
the employees sit?
||All hotel employees (except for the hotel general
manager or other executive personnel indicated by the
operator) are employed by the owner.
|5. Is it usual to have a non-compete clause, e.g.
that no other property with that brand can
open within a certain radius?
||Non-competes are common and usually negotiated.
|6. Who is responsible for insurance?
||The owner is responsible for the cost of property
insurance and the operator may put operational
insurances in place.
|7. Does the HMA give rights in real estate in your
|8. Does the HMA need to be recorded against the
property, if this is possible in your jurisdiction?
|9. Where financing is taken is it standard to obtain
a Non-Disturbance Agreement (“NDA”) as part
of a management or lease agreement?
||This depends on the bank and the operator/owner.
|10. What other agreements usually sit alongside an
HMA in your jurisdiction?
||There could be a number of different agreements
depending on the operator (e.g. (Brand) Licence
Agreement, Central Services Agreement, Technical
Services Agreement etc.).
Transfers and Assignments
|1. What are the standard rights/restrictions in
respect of transfer/sale of the hotel?
||Transfer rights under HMAs can vary widely.
Commonly, operators will require consent to any
change in ownership of the hotel. There may be
restrictions on transfers to competitors.
|2. When a managed hotel is sold (either asset or
share deal), is it usual in your jurisdiction that
either the Operator’s consent is required for
the sale, or that the hotel may only be sold if
the HMA transfers with the hotel?
||Yes, usually the sale/transfer/assignment or disposal of
the hotel require the operator’s prior written approval.
|3. Do HMAs commonly include a right of first
refusal for the operator to purchase the hotel?
||This varies on a case by case basis.
|4. Is it usual to include provisions which enable the
sale of the property with vacant possession i.e.
without the brand?
||Usually HMAs do not provide for this.
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