The Starting Point
Why the standard HMA template is not a neutral document
Every major hotel operator circulates a standard HMA drafted by its own legal team, refined over decades and structured to maximise fee income, minimise operator exposure and constrain the owner's ability to act unilaterally. The agreement typically runs 15-25 years. A base fee that seems modest at 2.5% of Total Revenue in year one compounds into a materially different number when modelled across a 20-year term at growing revenue. That figure excludes programme services, loyalty assessments and reservation fees are accounted for.
The Key Protective Clauses
Six provisions every owner must negotiate before executing an HMA
Not every clause in an HMA carries equal financial consequence. Legal advisors who are not specialists in hotel management agreements often spend time on boilerplate while accepting unfavourable drafting on the provisions that collectively define the owner's financial exposure and exit options across the full agreement term.
“A performance test without a genuine termination right is a clause that protects the operator, not the owner. If the only consequence of failing the test is another cure period, the owner has conceded the only leverage they have over a persistently underperforming manager.”
What Operators Will and Will Not Concede
Where operators have flexibility and where they hold the line
| Provision | Standard Template | Achievable With Leverage |
|---|---|---|
| Performance test | Heavily averaged; multiple cure periods; no genuine exit | Two-year rolling test with one cure period and real termination trigger |
| Termination for convenience | Not included | Included with compensation tied to years remaining |
| Base management fee | 2-3% of Total Revenue from day one | Reduced rate in pre-stabilisation period; lower base rate |
| GM approval right | Operator appoints without owner consent | Owner right to approve initial appointment and any replacement |
| Related-party procurement | Operator group companies may be preferred suppliers | Disclosure requirement; owner approval above defined contract value |
Common Owner Mistakes
The errors that consistently cost owners the most across the HMA term
- ! Accepting the performance test without a genuine exit right. An owner who accepts unlimited cure periods has, in effect, accepted a 20-year agreement with no exit regardless of how poorly the hotel performs.
- ! Using general legal counsel for a specialist document. An HMA contains hospitality-specific financial mechanics and precedent structures that a generalist advisor is unlikely to recognise as problematic. Owners who rely on general counsel routinely accept provisions that a specialist would flag immediately.
- ! Signing without running a competitive operator process. An owner who approaches a single operator has already surrendered the most significant source of negotiation leverage. A competitive process involving even two or three operators shifts the dynamic materially.
- ! Focusing on the base fee while ignoring total fee drag. Programme services contributions, central reservation fees, loyalty assessments and regional support charges are buried in schedules and often accepted without scrutiny. Their cumulative impact frequently exceeds the base fee itself.
The Role of Independent Advisory
What specialist advisory changes in an HMA negotiation
An advisor who has reviewed HMAs from the major operators in the past 24 months understands what is genuinely standard, what is operator-specific overreach and what has been successfully negotiated by other owners in comparable transactions. Beyond market intelligence, independent advisory changes the negotiation dynamic itself: an advisor can hold firm on provisions the owner needs without creating friction in the owner-operator relationship that will outlast the negotiation.
NOESIS Hotel Advisory provides HMA review, operator negotiation support and deal structuring advisory for hotel owners and developers across India. Our involvement in over 290 operator mandates gives us current, transaction-specific knowledge of what each major brand's negotiating team will and will not accept on the provisions that matter most.
For owners at any stage of the HMA process, whether reviewing an initial draft or preparing for a first negotiation meeting, a deal structure review is the appropriate starting point before any further engagement with the operator.
Get your HMA reviewed before it is signed, not after.
NOESIS provides deal structure review and HMA negotiation support for hotel owners and developers across India. Commission a review to understand what the agreement actually protects and where your exposure lies.