My unofficial assessment is that one of the best breakout sessions, as to both content and attendance, at the 34th Annual New York University International Hospitality Industry Investment Conference was the Hotel Management Agreement panel. The panel offered an honest and in-depth assessment of most of the key hotel management agreement issues confronted in the owner-operator negotiation process. The panel provided a clear point and counterpoint from the perspective of the brands on the panel (Allison Reid of Starwood and Noah Silverman of Marriott), as well as from the owner’s point of view, provided by Greenberg Traurig’s Michael Sullivan.
There was no big surprise or bombshell. But there was an interesting conversation indicating that the brands are aware that hotel owners today include private equity and similar concerns. These entities might own the hotel for a period of 5 to 7 years, which is much shorter than the term of the typical full service hotel management agreement. Brands are now aware that something might have to "give" to keep those deals going. That "something" might include an owner’s right to terminate the management agreement upon a sale of the hotel following the expiration of a lockout period and payment of a termination fee. Certainly, the price of the right to terminate upon sale might be high, but the thought that any of the major brands might consider the concept is something to note.©2013 Greenberg Traurig, LLP. All rights reserved.