What a hotel management agreement really costs
The base fee is only the start. Here are the other lines that decide what a management agreement costs you.
Start with the base fee
Base fees are usually a percentage of total revenue, often in the low single digits. Because it is a share of revenue, it is paid whether the hotel makes money or not. Ask whether it applies to total revenue or only rooms revenue, and whether there is a monthly minimum.
Then the incentive fee
Many agreements add an incentive fee tied to profit above a threshold. The questions that matter: how profit is defined, what the threshold is, and whether capital reserve contributions and owner-requested expenses count before or after it is measured.
Reimbursables and allocated costs
Accounting, payroll processing, technology, purchasing, training and regional overhead can be charged on top of the fee, sometimes as flat amounts and sometimes as shares of company-wide cost. These do not appear in the headline percentage. Ask for a list of every charge that can reach your P&L.
Term and the cost of leaving
A long term with termination fees turns a fee problem into a trap. Look for the initial term, renewal mechanics, termination without cause, any fee to leave, and whether you can exit if performance falls below an agreed standard.
Who is accountable for results
Check for performance tests tied to budget or to your comp set, and for key-person language naming the people actually assigned to your property. Without them, you are paying for a promise.
Add it up as one number
Model the all-in annual cost as a percentage of revenue, with every fee and charge included, then compare it with what you would pay for the oversight you actually need. Our fee comparison is a starting point, and we are glad to review a real agreement for free.
Try it free for 30 days.
One property or a portfolio. No contract and no pressure: start the trial, get the calls and reporting on your calendar, and decide whether it is worth the flat fee.