Leasing Hotel vs. Management Company

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@dpaattorneys.com.