The credit world is considered by many to be in turmoil. Real estate values as measured through investment sales are below the lofty heights of just months ago. Residential absorption is dismal in many markets. Nevertheless, the possibilities for mixed-use development, anchored by an imagination catching array of amenities, remain strong, both domestically and internationally. In such a climate, the hospitality industry is attracting interest from experienced developers, owners and operators to be sure. However, there are new players in the game who see the allure, but are less familiar with the rules.

This article provides a brief overview, both historic and current, of the law relating to hotel management agreements. The concepts and principles discussed generally apply to the relationship between hotel owners and operators. Certain ancillary and operationally-specific issues (such as termination rights to limitations on the authority of the operator with respect to purchasing goods and services for the hotel) will be only briefly introduced.

Generally, hotel management agreements prior to the early 1990's were 20- to 30-year, non-cancelable contracts that granted the operator (usually the company that controlled the hotel brand) near-total control and authority over all aspects of hotel operations. Such contracts provided little potential for removal ...