Authored by our Group CEO, Roger Allen.
For most of the past three decades, the Hotel Management Agreement (HMA) has been drafted, negotiated and interpreted largely on the operator's terms. Owners have historically signed agreements running twenty to thirty years, accepted brand standard capex obligations as a cost of doing business, and treated fee structures as largely non-negotiable. That shift began earlier than many assume, and timelines have long differed by region: the US market, for instance, has favoured shorter terms than much of Europe, Asia or the Middle East. What has changed is the pace and breadth of the trend. Across both mature and emerging hospitality markets, owners are now renegotiating the fundamentals of the HMA as a matter of course, and the operators winning new mandates are the ones adapting their terms to match.
As consultants who review these agreements on behalf of owners, investors and asset managers, we are seeing the same patterns recur across markets and asset classes. None of them make HMAs simpler to read. If anything, the agreements being negotiated today carry more moving parts and more interdependency between clauses than the templates most owners grew up with, which is exactly why understanding the shifts below matters, whether you are structuring a new agreement, renewing an existing one, or simply testing whether your current arrangement still reflects market norms.
Bargaining power is moving to owners
The most consequential shift is structural. Terms that were once fixed at twenty to thirty years are now more commonly negotiated to ten or fifteen, with clearer, performance-based termination rights built in from the outset. Owners are no longer willing to commit capital for a generation on the strength of a brand name alone; they want to offset the risk with strong guarantees and have the ability to exit, or at least renegotiate, if performance falls short of agreed benchmarks. The dilemma this creates for operators is real: a shorter term with hard, owner-priority performance triggers reduces the security that historically justified their own long-horizon investment in the asset, so operators who concede on term length are increasingly looking for something in return elsewhere in the agreement, whether that is fee structure or renewal rights.
This has had a knock-on effect on capex obligations. Owners are pushing back harder on "brand standard" mandates, particularly renovation and technology upgrades, unless the operator can demonstrate a credible link between the required spend and RevPAR uplift. A capex request without a supporting return case is now far more likely to be challenged or rejected outright.
The rise of hybrid structures reflects the same underlying shift. For select-service and midscale assets in particular, owners are increasingly weighing a full-service management agreement against a franchise arrangement with an independent operator, or self-management altogether. The traditional assumption that a recognised brand requires a full management contract is being tested deal by deal, and owners are willing to walk away from full-service management if the economics of a franchise or third-party operator model work out better.
Fee structures are being rebalanced
Base fees, historically calculated as a fixed percentage of total revenue regardless of profitability, are shrinking in relative terms. In their place, incentive fees are being weighted more heavily towards GOP and RGI performance, or the owner's priority return hurdle, an approach favoured by owners. The logic is straightforward: owners want operator compensation aligned with the returns they actually receive, not simply with top-line growth that may or may not translate into profit.
As Marco Nijhof, Chairman of RLA Global, notes: “The Pro Forma financials which are presented during the negotiation of the HMA are becoming more important, and owners want to hold the management companies to their word - no more fake promises of returns.”
Cost allocation is coming under the same scrutiny. Owners are also demanding far greater visibility into how fees are allocated and spent, and specifically, whether they are actually benefiting the individual property or simply subsidising the wider brand portfolio. The Sales & Marketing fee is the clearest example of this shift. Where owners once accepted the fee as a fixed line item, they are now routinely requesting the underlying Sales & Marketing plan, the associated budget and regular performance reports, effectively asking operators to justify the fee against demonstrable value delivered to the asset rather than the brand as a whole.
“The fee mechanism is where an HMA either aligns interests or quietly doesn't. Owners often focus on the headline percentage and miss the definitions sitting underneath it - GOP, priority return, adjusted revenue - that actually decide who benefits when performance improves, ”says Laura Dutrieux, Junior Partner at RLA Global.
Technology, data and distribution are no longer a black box
A newer but fast-growing area of friction concerns technology and distribution. Many of these systems, PMS and CRS platforms in particular, sit within the operator's wider corporate and distribution agreements, so an owner's real influence over how they are run is often limited. What owners are realistically negotiating for is greater visibility: audit rights into loyalty programme cost allocations and OTA commission strategy, and clearer reporting on how system fees are calculated. System fees that were once accepted without much scrutiny are now being questioned as opaque, and owners increasingly want evidence that they represent fair value. This is not without friction on the operator side; brand-wide systems exist partly because scale drives down cost and improves distribution reach, so an owner's request for an audit right has to be weighed against what it might cost the asset in lost network benefit. Underlying all of this is a live and unresolved industry debate over data ownership, one that HMAs are only beginning to grapple with, rather than a settled question either side can point to.
Key money and capex sharing come with sharper conditions
In competitive markets, operators are still offering key money and upfront incentive contributions to win mandates, but the terms attached to that capital have tightened considerably. Clawback clauses tied to performance targets are now standard practice in many of these arrangements, meaning operators carry more downside risk if projected performance is not achieved. For owners, this shifts key money from a simple sweetener into a genuine test of the operator's confidence in their own projections, and the clawback mechanics are worth scrutinising as closely as the headline sum, since a poorly drafted trigger can be effectively unenforceable.
ESG and conversion clauses are reshaping long-term flexibility
Sustainability obligations are increasingly written directly into HMAs, particularly in Europe, where EU Taxonomy requirements are pushing capex planning further into the agreement itself rather than leaving it to future brand standard updates. At the same time, we are seeing more soft brand and lifestyle-conversion clauses, giving owners the flexibility to move away from a legacy full-service brand if it underperforms relative to the asset's positioning and market. Both trends point in the same direction: owners want built-in flexibility rather than a fixed twenty-year commitment to a single brand model.
That flexibility comes at a cost. Conversion rights and sustainability capex obligations both need to be priced and negotiated at signing, not treated as a free option to be exercised later.
What comes next
We expect these shifts to keep accelerating rather than settle into a new steady state. Shorter terms and performance-linked termination rights are likely to become the market standard rather than the exception, even outside Europe and North America, as owners in emerging markets increasingly benchmark against the terms being negotiated elsewhere. Fee structures will keep moving further towards profit alignment, and we would not be surprised to see technology and data audit rights become a standard negotiating item rather than a point of friction reserved for larger, more sophisticated owners. ESG-linked capex obligations, currently concentrated in EU Taxonomy markets, are likely to spread as sustainability reporting requirements extend into other jurisdictions.
For owners and asset managers, the practical implication is that an HMA signed even five years ago may already sit meaningfully out of step with where the market has moved, on term, on fees, on capex conditionality, or on all three at once.
If you are negotiating a new agreement, approaching a renewal, or simply want a clear-eyed view of how your existing HMA compares with where the market has moved, we would be glad to talk through what we are seeing.
Get in touch with us at contactus@rlaglobal.com
