Apac hotel management agreements now average 17 years: JLL

As hotel markets in the Apac region mature, HMAs are expected to include more versatility, containing provisions for sustainability and discontinuation choices, to optimize accommodations’ value, claims Nijnen. “We are observing proprietors come to be considerably smart in their administration agreement negotiation and critically consider their branding and operating systems.”

According to the questionnaire, the common base fee in HMAs has actually decreased to 1.6% of profits from 1.7% previously. Still, the loss in management fees is significantly countered by higher sales and marketing fees charged by drivers, program fees and other variable costs, says Nijnens. The survey spotted that a greater proportion of providers are charging sales and advertising costs of 3% or more on room earnings or overall income compared to previous years.

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Another significant change observed in the past twenty years is the addition of performance termination arrangements in HMAs. The study discovered that 93% of agreements currently include this stipulation, normally connected to statistics like income per available space productivity and gross running earnings.

Hotel management agreements (HMAs) in Asia Pacific (Apac) are ascending in period, according to study by JLL. Findings from a recent questionnaire commissioned and published jointly by the real estate consultancy and legal company Baker McKenzie found that the standard term of HMAs has already enhanced by 4 years since 2005 to get to 17.4 years as of 2024.

JLL highlights that the size of HMAs executed in the area changes across the various markets. In the Maldives and Japan– markets with more luxury lodging properties and operators who favor to seal in brands for longer– the average HMA duration places at 26 and 23 years, respectively. On the other hand, Australia favours much shorter contracts and unencumbered property sales, leading to a common HMA term of 15 years.

The survey analysed findings from 400 HMAs over the past two decades, consisting of 145 deals signed between 2018 and 2023.

The period for HMAs signed in Apac has trended upwards despite a decrease in management charges, claims Xander Nijnens, top regulating supervisor and head of advisory and asset administration for LL Hotels and Hospitality Group, Asia Pacific. “In the majority of markets, we have viewed hotel supervision charges come down, and increasingly, fees are linked to results against concurred performance thresholds, which develop added incentives for owners to accomplish,” he includes.

JLL and Baker McKenzie also anticipate a rise in alternate operating designs for hotels, with a growth in grip for white tag providers, straight franchises and ‘” manchises”, the term for an HMA where an opportunity to convert the HMA right into a franchise arrangement is included.


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