July 27, 2021

Volume XI, Number 208

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July 27, 2021

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July 26, 2021

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STR (Hotel Market and Data Benchmarking) Making Changes

STR is making changes to the highly regarded and widely used STAR Report.  Those of us who spend time drafting, reviewing, negotiating, and understanding hotel management agreements know that an important element of a management agreement is the Performance Test, and that a critical element of the typical two pronged performance test is the RevPAR threshold as compared to the hotel’s competitive set.  The guidelines that will go into effect on Jan. 1, 2017, are designed to recognize and accommodate for recent (and probably continuing) consolidation in the hospitality industry, and achieve a better balance within the competitive set.  One very important clarification in the new guidelines is that the competitive set would have not less than 4 hotels, excluding the subject hotel, and include at least 2 management companies, also excluding the subject hotel.

The new guidelines may be very helpful, and all parties to management agreements should consider the implications.  That being said, remember that not all management agreements permit changes to the initial competitive set.  Parties to management agreements should consider examining the existing management agreement to assess the potential for competitive set revisions while also reviewing the new guidelines.

©2021 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume VI, Number 141
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About this Author

Nelson Migdal, Greenberg Traurig Law Firm, Washington DC, Real Estate Law Attorney
Shareholder

Nelson F. Migdal is Co-Chair of the Hospitality Practice. He focuses his practice on the acquisition and disposition of hotels, hotel operations and management, franchising, licensing and branding, development and finance, large mixed-use projects, hotel management agreements, licensing agreements, commercial real estate acquisition and sale, and commercial leasing.

He has prepared and reviewed management and franchise agreements, purchase and sale agreements, multiple building covenants, and other documents related to the acquisition, financing...

202-331-3180
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