Restaurants, hotels and travel
Management contract (hotels)
A deal where a hotel company runs a hotel it does not own, in return for fees.
Last reviewedWhat does Management contract (hotels) mean?
Under a hotel management contract, the property owner (often a real estate investor or family business) owns and pays for the building, while a hotel company such as Marriott, Hilton, IHG or Accor runs it under its brand. The operator earns a base fee, often a small percentage of total revenue, plus an incentive fee tied to profit such as GOP. Example: on a hotel with 20 million of revenue and a GOP of 7 million, a base fee of 3 percent (600,000) plus an incentive fee of 8 percent of GOP (560,000) earns the operator 1.16 million without owning the building. The owner keeps the rest of the profit but carries the property risk and capital costs.
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Related terms
- Asset-light modelGrowing a business without owning the heavy assets, by franchising, managing or leasing them.
- GOP (gross operating profit)A hotel's profit after the costs of running it, before fees, rent and ownership costs.
- Franchise royaltyThe ongoing fee a franchisee pays the brand, usually a percentage of sales.
- Prime costFood and drink cost plus labour cost, the two biggest restaurant costs.
- Table turnsHow many times each table is used by a new group in a meal period or day.
- CoverOne guest served a meal: the unit restaurants count.
- Same-store sales (comparable sales)The US name for like-for-like sales: growth at restaurants or stores open in both periods.
- Average unit volume (AUV)Average yearly sales per restaurant or store.