Australian management agreements are more owner-friendly than elsewhere in Asia Pacific, according to research by JLL and Baker McKenzie.
Based on data from the Asia Pacific Hotel Management Agreements (HMAs) survey, conducted last year by the two companies, the results draw from analysis of 46 contracts entered into between the beginning of 2018 and the end of 2024.
The results found that base fees averaged 1.3% of gross revenue in Australia – while elsewhere in Asia Pacific this is 1.6%.
Contract term averaged 15 years, (elsewhere 17 years); key money was paid by operators in 65% of contracts (elsewhere 22 %); and cash-based FF&E Reserves appeared in 52% contracts (elsewhere 73%).
Owner consent requirement for General Manager was 91% (87% elsewhere) and 67% for Financial Controllers and Director of Sales and Marketing (73% elsewhere)
Two-pronged performance test (which is the most commonly found variant) appeared in 67% of contracts (elsewhere 41%).
“The landscape of HMAs in Asia Pacific has seen significant shifts over the past two decades, and we anticipate further evolution in the coming 10 years as the region’s operating environment continues to transform,” said JLL Hotels and Hospitality Group Executive Vice President, Advisory & Asset Management, Australasia, Ross Beardsell.
“Termination provisions will remain a crucial negotiation point, particularly as increased liquidity and hotel transactions in Asia place a premium on assets with terminable HMAs.
“Striking a balance between ensuring uninterrupted operations for operators and maintaining flexibility in divestment options for owners will be essential in future agreements.”
Baker McKenzie, Sydney, Partner, Sebastian Busa, said while it is clear that owners in Australia are able to negotiate better deals with operators, “what is less clear is why”.
“There are potentially many factors such as competitive tension, market size and the differing reasons which underly hotel ownership,” he said.
Baker McKenzie, Melbourne, Partner, Dora Stilianos, said: “Even though we have questioned the benefits to an owner and its financiers of key money, this remains an extremely popular commercial term.
“Equally we have questioned the effectiveness of current performance-based termination provisions. Notwithstanding this view, these provisions remain very popular.”
“The survey of necessity is backward looking, moving forward we are seeing many new trends emerging in hotel management,” said Baker McKenzie, Sydney Of Counsel, Graeme Dickson.
“There is the increasing relevance of white label management, split management where a traditional operator runs the rooms component, and a respected restaurateur runs the food and beverage as well as manchises which generally give an owner the right to convert from a management agreement to a franchise.”