Owner’s Priority- The Most Important Provision in a Hotel Management Contract Fee Structure ...Middle East

In hotel management agreements, the alignment of interests between hotel owners and operators is often more theoretical than practical. Operators typically earn a base management fee tied to a percentage of gross revenue and an incentive management fee tied to profitability, most often a percentage of gross operating profit (GOP) or adjusted net operating income. While this incentive fee is meant to motivate the operator to maximize the hotel’s bottom line, it does not always ensure the owner receives a fair return on their investment, especially during periods of underperformance.

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