Apac hotel management agreements now average 17 years: JLL
As hotel markets in the Apac region mature, HMAs are expected to include more adaptability, including stipulations for sustainability and discontinuation options, to optimize accommodations’ value, claims Nijnen. “We are observing proprietors come to be increasingly wise in their monitoring contract negotiation and critically consider their branding and running models.”
Hotel management agreements (HMAs) in Asia Pacific (Apac) are increasing in period, according to study by JLL. Findings from a recent poll commissioned and released jointly by the real estate consultancy and legal firm Baker McKenzie identified that the average term of HMAs has already enhanced by 4 years from 2005 to reach 17.4 years as of 2024.
The period for HMAs signed in Apac has trended upward in spite of a decrease in monitoring fees, states Xander Nijnens, senior managing director and head of advisory and asset management for LL Hotels and Hospitality Group, Asia Pacific. “In the majority of markets, we have viewed hotel management costs reduce, and increasingly, fees are associated to outcomes opposing agreed performance limits, which make added motivations for owners to function,” he includes.
JLL and Baker McKenzie also expect a surge in alternative operating designs for accommodations, with a growth in grip for white tag providers, straight franchises and ‘” manchises”, the term for an HMA where an opportunity to transform the HMA into a franchise setup is involved.
According to the survey, the average base fee in HMAs has actually declined to 1.6% of revenue from 1.7% formerly. Still, the fall in managing charges is increasingly balanced out by higher sales and marketing costs billed by operators, program fees and other variable costs, states Nijnens. The study found that a greater proportion of managers are billing sales and advertising fees of 3% or even more on room revenue or overall earnings compared to preceding years.
JLL accentuate that the size of HMAs signed in the region differs across the numerous industry. In the Maldives and Japan– markets with more deluxe accommodation properties and owners that favor to secure in labels for much longer– the average HMA duration places at 26 and 23 years, specifically. On the other hand, Australia favours much shorter agreements and unencumbered property sales, resulting in a common HMA term of 15 years.
One more significant shift noticed in the past twenty years is the inclusion of performance discontinuation stipulations in HMAs. The study found that 93% of agreements currently include this provision, usually tied to statistics such as revenue per offered area productivity and gross working earnings.
The survey analysed results from 400 HMAs over the past two decades, consisting of 145 contracts confirmed around 2018 and 2023.
