Chapter 15 Contract Management

Chapter 15 Contract Management - Contract Services...

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Unformatted text preview: Contract Services Management Chapter 15 ◆ The organization that manages lodging or foodservice operations for owners are called operators. ◆ Usually a company buys the real estate and then hires a different company (operator) to come run the real estate the correct way. ◆ The agreement between owners and operators is a contract; thus this segment of the industry is called Contract Services Management. Operators There are two types of operators: 1. Chain operators 2. Independent contractors ◆ Chain operators are affiliated with major hotel chains. ◆ There have been many mergers between chain brands which create mega-brands. ◆ Therefore this group of major chains is becoming smaller each year. Operators- Chain Operators- Independent ◆ Independent contractors are not affiliated with any specific brand. ◆ They purchase brands and locations based on their assessment for compatibility with their objectives. ◆ The concept of separating the ownership and operation of a lodging property came with the expansive growth of the hotel industry in the 1970s and 1980s. ◆ Investors could buy land all over the country and not be worried about the challenges of running a lodging company. ◆ Also, successful management companies were able to grow their brand names and expand into new markets, without huge capital expenditures. ◆ There are three parties involved in hotel management contracts: 1. Operators 2. Lenders 3. Owners ◆ Operators desire an increase in both market presence and market share, maintaining control over the day-to-day management decisions, and long-term stability. The Contract Parties ◆ The most significant change in contract process over the past few years: – More active involvement of lenders – Increase in power of the owners ◆ Lenders are interested in: – Generating a rate of return – Protecting the investment ◆ Lenders have recently become more involved in the negotiation of these contracts Contract Parties ◆ The owners are interested in: – Generating cash flow – Ensuring their investment grows in value ◆ Owners have developed more knowledge about hotel operations as they acquire more properties and more experience....
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This note was uploaded on 11/07/2011 for the course HFT 1000 taught by Professor Dr.kharris during the Fall '10 term at FSU.

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Chapter 15 Contract Management - Contract Services...

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