Increasingly, hotel owners are choosing between leasing their properties and hiring a management company. Below is a list of Pros and Cons to consider for each arrangement.
Leasing Hotel
PROS:
- Lessee takes on the financial, operational, and legal burden
- Lessor receives a guaranteed fixed monthly amount
- Safe and secure
CONS:
- Significantly limits hotel owner’s potential profits
Management Company
PROS:
- Owner not involved in day to day operations
- Owner receives 100% of profit
- High risk, high return
CONS:
- Owner maintains financial and legal burden
- Owner may not be satisfied with Management Company’s operational decisions
- On average, 3% of revenue goes to Management Company
Owners looking for security, usually choose to lease their hotel. While Owners looking to share in profits, hire a management company and are willing to assume market risk. Regardless of which option you choose, be sure to execute a full-proof Lease Agreement or Management Contract that protects your interests. Ensure these contracts include an exit strategy that allows you to terminate the contract in case the arrangement goes awry.
Should you need help drafting or reviewing a Lease Agreement or Management Contract, email us at ppatel@dpalaw.com.
