How to Choose a Hotel Management Company

Start with what you actually need

Before you send a single RFP, write down what problem you are hiring a management company to solve. Is it a property you cannot be at every day, a brand that keeps flagging you on quality audits, a GM who needs a boss, or a hotel that is simply underperforming its market? The answer shapes everything else: the type of company you need, the fees that make sense and how much control you are willing to hand over. Owners who skip this step tend to compare proposals on fee alone, which is rarely the thing that decides whether the hotel improves.

Match the company to your property and brand

A management company that runs full-service convention hotels is not automatically the right fit for an 85-room select-service hotel off the interstate, and the reverse is also true. Ask every candidate for a list of hotels they currently manage in your brand family, your chain scale and, ideally, your type of market. Experience with your franchisor matters because brand standards, reservation systems, loyalty programs and quality audits vary by brand. Also ask how many hotels each regional leader oversees and where your property would sit on their priority list. A small hotel in a large portfolio can end up with very little senior attention.

Understand the fee structure

Ask every candidate to quote fees in the same format so you can compare them side by side. HVS reports that base management fees typically run 2 to 4% of total revenue, with about 3% most common, and CBRE surveys from 2012 to 2019 found total management fees averaged roughly 3.0 to 3.5% of revenue. Incentive fees, per HVS, are commonly 10 to 20% of profit above an owner return hurdle, though recent CBRE data shows only a minority of hotels actually pay one. The base fee is only part of the cost, so ask for a written list of everything else:

• Accounting, payroll and IT fees charged to the hotel
• Centralized services, revenue management and sales fees
• Technology, software and group purchasing charges
• Travel, recruiting and relocation costs for managers
• Fees for capital project oversight, openings or PIP work

Our management agreement costs guide walks through where these charges usually hide.

Meet the people who will run your hotel

You are hiring people, not a logo. Insist on meeting the regional director who would oversee your hotel and, if the company would replace or recruit your GM, ask to see their process and timeline for doing so. Ask who handles revenue management, sales, accounting and HR support, and whether those people are dedicated or shared across dozens of hotels. Put the key people in the RFP response and ask whether the agreement will name them or give you approval rights if they change.

Reporting, budgets and owner controls

Request sample monthly reports from a hotel similar to yours, with names removed. A good package includes a P&L in USALI format compared against budget and last year, an STR report summary, labor reporting, a cash and receivables review and written commentary that explains variances instead of just listing them. Ask how the annual budget is built, when you see it and whether you have approval rights. Clarify spending limits that require your sign-off, who controls the operating bank accounts and how quickly you get month-end financials.

Performance tests, term and termination

This is where many owners lose leverage. CoStar data puts the average third-party management term at around 5 years, while brand-managed agreements can run 20 years or more, so understand exactly what you are committing to. Ask for a performance test that lets you terminate if the hotel underperforms; these often reference a RevPAR index of around 85 to 90% of the comp set and/or a share of budgeted GOP, failed in consecutive years. Also look for termination without cause, termination on sale and any fees owed on exit. Have your attorney review the management agreement and how it interacts with your franchise agreement before you sign.

Check references the right way

Every company will hand you its happiest owners. Ask instead for references from owners of hotels similar to yours, from an owner who has been with them more than three years and, if possible, from an owner who left. Good questions to ask:

• Did the company hit its first-year budget, and how did they explain misses?
• How often did the regional leader actually visit?
• Were there surprise charges on the P&L?
• How did they handle a GM change or a bad brand audit?
• Would you sign with them again on the same terms?

When a lighter oversight model may fit instead

Not every hotel needs a full management company. If you already have a capable GM and team, what you may need is senior operating oversight: someone reviewing the P&L and payroll, holding the GM accountable, preparing for brand audits and pushing sales, without taking over your bank accounts or locking you into a multi-year term. That is the gap fractional oversight is built to fill, with flat monthly pricing and no long-term contract. Compare the options on our hotel management company alternatives page, or use the plan finder to see which model fits your property.

Big Tex Hospitality Management Advisors · Updated 2026-10-17 · Reviewed by Ryan NeGron, former hotel GM and VP of Operational Management. General information, not legal or financial advice.

Related reading

• Alternatives to a hotel management company for independent owners
• What a hotel management agreement really costs
• What is fractional hotel management?
• Hotel asset management vs. hotel management: what owners need to know
• Twelve questions to ask before you sign a management agreement

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