The overwhelming impact of COVID-19 has led to a fundamental rethink as to whether traditional concepts embedded in HMAs remain fit for purpose. In the opinion of the authors, significant aspects of the traditional HMA are in need of a calibration and in some instances a fresh approach. By way of background, traditionally HMAs are skewed in favour of operators – for example, as mentioned below, current variations of performance based termination provisions generally fail to give an owner the ability to terminate a HMA even in the face of obvious and profound operator underperformance. The inherent uncertainty with running a hotel business combined with the competitive tension amongst operators is tending to move the dial more in favour of owners. This is beneficial for owners, of course, but also operators as it makes investment in the hotel industry more attractive in a world with limited and increasingly selective capital to invest.
In November 2022 we published a newsletter seeking to deal with a number of the more significant curly topics on HMAs.
In view of the significant number of HMA negotiations we have undertaken over the last year or so both in Australia and internationally, we consider it is timely to update the topics discussed in our previous newsletter.
As is usual, the views expressed in this newsletter are the writers' alone.
While the issues discussed are primarily from an Australian perspective, by and large the concepts are universal. We trust that you will find what follows at least worthy of your consideration and perhaps a little thought provoking.
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