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we're here to talk about the subject of hotel management agreements and specifically what do owners need to see in a hotel management agreement to optimize the value of their asset and improve the chances of getting any development done there are a great number of hotel operating companies out there some of which have their own brand and some of which don't and it's really important to choose the right partner and the the right type of operating agreement and the terms of the operating agreement agreements are only part of the decision-making process if you're an owner of a hotel and considering which operating structure to put in place or which operator to employ it's vital to get the right advice both from a property perspective to ensure that the value of your asset is maximized and also from a legal perspective a bad management contract can have a seriously detrimental impact on the sale ability and the value of your hotel it's a huge topic to discuss in five minutes so we're going to focus on a few takeaways firstly ensuring flexibility in management contracts what why do you think flexibility is so important in management agreements and what are some of the key terms that can be introduced to enhance flexibility from an owners perspective like you said I think flexibility is obviously very important and on an exit potentially very valuable I think there's two probably two areas to focus on in terms of headline flexibility but the right to terminate the contract early it's one area so typical management contracts probably about 25 years if it's with a big chain so you might have the right to get out of that early on payment of a couple of years fees the other other area fruits that we're seeing a lot more at the moment is transfer to franchise rights where you can terminate the management contract but take a franchise with the same brand both have their big advantages the straight termination option obviously that gives an owner a lot of comfort if things aren't going well there's a price to terminating but they can terminate and the asset reposition it run it themselves gives them a lot of options but crucially on a sale it means you have a much bigger pool of in potential investors classic vanilla management contracts are probably of interest you know property investors but there's not that much you can do with that hotel it's it's encumbered by the management contract for a long time if you can terminate it then there's all sorts of things you can do you can rebrand you can run it yourself you can refurbishing completely reposition the asset if you want to and that brings in other operators as potential buyers but probably more importantly private equity investors those kind of guys who will be looking for much higher returns but equally will pay a much bigger price for it the flip to franchise right slightly different and and I guess for obvious reasons more popular with operators in fact some I would say will will not bat an eyelid now about granting that particularly to the right kind of owner that gives flexibility so the owner can obviously take control of operations themselves if they're not happy with how efficient things like how efficiently the hotel is being run and again on a sale it gives you that extra edge in it you know brings in people with their own operating platform like Westmont hospitality and probably makes you more attractive to guys who want to do things a bit differently as well and bring in their third party operator