It's simple. It's all about control! A retail management agreement typically provides a hotel owner with much greater control over the day-to-day operations of a retail facility than a retail lease does. The first question a hotel owner should ask is, "do I really want control over the day-to-day operations of the retail facility?" The answer may vary from facility to facility. For example, the hotel owner may not wish to delve into the day-to-day operations of the sundry shop, but the food and beverage operation, that may be quite a different matter because the food and beverage experience is closely tied to the overall guest experience.

There are pros and cons to each scenario, and the terms and conditions of the lease or the management agreement can be creatively structured to reach that fine balance between control and "hands off". Surprisingly, economics do not play into this issue as much as one would think.

What's the Difference?

Management Agreement: A management agreement is an agreement whereby the retail operator agrees to manage the retail facility on behalf of the hotel owner. Typically there is a definitive term, clear expectations as to the day-to-day operations, including layers of consent (i.e. control) from the ...