Hotel Flag Agreement

September 22, 2021

In the hotel and restaurant sector, there are a number of important players and stakeholders who have been involved in running a successful hotel. Hotel brands, hotel owners and asset management companies often collaborate to create transformations and combinations of operating models to maximize profitability and increase guest satisfaction. The question asked to the hotel owner is: “How to choose between a franchise agreement or a hotel management contract?” and “Which model is best for your hotel?” This article is intended to give a brief overview and comparison between the two hotel operating models. What are the drivers of the hotel`s demand? This is often the lender`s first question. Unlike an office building or retail property under lease, hotel income is purely derived from the demand for existence. Many factors can influence the demand for a hotel, whether in a large MSA, along a highway, near a university or university or fueled by tourism; These and other factors have an immediate impact on the revenue generated by a hotel. Demand is also influenced by the number of hotels in the immediate vicinity. Financial Support: In general, the franchisee does not offer direct or indirect financing for Marriott franchised hotels and does not guarantee any financing, loans or other commitments. However, from time to time, in very limited circumstances and at its discretion, the franchisee may offer certain hotels credit assistance in the form of a conditional guarantee for a portion of a loan granted by a third-party loan or grant a mezzanine loan. With CMBS and other Wall Street institutional investors focusing primarily on ownership, your hotel flag is a key factor in your lender`s decision.

In summary, there are several factors to determine which operating model is right for the hotel. For example, the experience and risk-taking of the owner, the size and standard of the hotel property, the suitability and availability of potential brands, etc. Do you have a question for our expert? Write to our editor at todayshotelier@naylor.com….

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