Last year, JLL (NYSE: JLL) and Baker McKenzie published the Asia Pacific Hotel Management Agreements (HMAs) survey, the most comprehensive study of its kind in Asia Pacific.

This data has now been used to prepare a further report devoted specifically to the Australian market and draws from 46 contracts entered into between the beginning of 2018 and the end of 2024.

Most interestingly, there is clear evidence that the terms of Australian management agreements are more owner-friendly than elsewhere in Asia Pacific.

The major differences as detected by the survey are:

• Base fees averaged 1.3% of Gross Revenue (elsewhere in Asia Pacific 1.6%)
• Contract term averaged 15 years (elsewhere 17 years)
• Key money was paid by operators in 65% of contracts (elsewhere 22 %)
• Cash-based FF&E Reserves appeared in 52% contracts (elsewhere 73%)
• Owner consent requirement for General Manager 91% (87% elsewhere) and 67% for Financial Controllers and Director of Sales and Marketing (73% elsewhere)
• Two-pronged performance test (which is the most commonly found variant) appeared in 67% of contracts (elsewhere 41%).

"“The landscape of HMAs in Asia Pacific has seen significant shifts over the past two decades, and we anticipate further evolution in the coming ten years as the region's operating environment continues to transform. Termination provisions will remain a crucial negotiation point, particularly as increased liquidity and hotel transactions in Asia place a premium on assets with terminable HMAs. Striking a balance between ensuring uninterrupted operations for operators and maintaining flexibility in divestment options for Owners will be essential in future agreements, ," says Ross Beardsell, Executive Vice President, Advisory & Asset Management, Australasia, JLL Hotels & Hospitality Group.

“Whilst it is clear that owners in Australia are able to negotiate better deals with operators - what is less clear is why. There are potentially many factors such as competitive tension, market size and the differing reasons which underly hotel ownership.’ says Sebastian Busa, Partner, Baker McKenzie, Sydney.

“Even though we have questioned the benefits to an owner and its financiers of key money, this remains an extremely popular commercial term. Equally we have questioned the effectiveness of current performance-based termination provisions. Notwithstanding this view, these provisions remain very popular.” Says Dora Stilianos, Partner, Baker McKenzie, Melbourne.

“The survey of necessity is backward looking, moving forward we are seeing many new trends emerging in hotel management. There is the increasing relevance of white label management, split management where a traditional operator runs the rooms component, and a respected restaurateur runs the food and beverage as well as manchises which generally give an owner the right to convert from a management agreement to a franchise.” Says Graeme Dickson, Of Counsel, Baker McKenzie, Sydney

Hotel owners have changing requirements and we’re confident our collaborative Hotel Management Agreement study with Baker McKenzie provides invaluable insights that align our guidance and recommendations with current market realities. This comprehensive understanding, coupled with industry benchmarks, enhances our ability to negotiate effectively and ensure that owners' interests are fully addressed,” concludes Beardsell.