The Economic Times carried a story this week that made me smile into my morning chai. Hotel management contracts in India, it said, are becoming "more even." Owners are negotiating harder on performance benchmarks, capital expenditure, data responsibilities and exit rights. Operators are offering key money and brand-standard freezes. Lawyers who draft these agreements say the blanket indemnities that once protected operators are being narrowed, and in several cases removed entirely.
After thirty years of running boutique and independent hotels across the Maldives, the Seychelles, Indonesia and India, and now sitting firmly on the owner's side of the table as a consultant, let me tell you: this shift was not gifted to owners. It was earned. And it will only last as long as owners behave like they deserve it.
Why is it happening? Simple arithmetic. Every global and Indian chain has announced plans to double its portfolio by 2030. Flags need buildings, and buildings belong to owners. When the operator needs your asset more than you need their brand, the balance of power moves. That window is open right now. It will not stay open forever.
So what should an owner actually do with this moment? Here is what I tell every client who sits across from me.
One: the performance test is the whole game. Everything else is decoration. Insist on a real one. If the operator misses an agreed RevPAR index or GOP threshold for two consecutive years, with a fair cure period, you should be able to terminate without paying out the remaining years of fees. An operator who truly believes in their brand will sign this. One who hesitates has told you something important.
Two: follow the centralised costs. This is where profit quietly leaks. Central reservation systems, loyalty programmes, marketing contributions, shared services. Demand line-item transparency, annual caps, and audit rights. I have seen hotels where these charges, added up, rivalled the management fee itself. Most owners never check.
Three: capex is your money, so act like it. Brand-standard refreshes will come, but negotiate a capex calendar at the start rather than a surprise renovation demand in year four. The brand-standard freezes operators are now offering are worth real money. Get them in writing.
Four: consider the franchise route honestly. Domestic chains moving toward franchise structures is the most interesting part of this story. If you have a competent general manager and a stable team, franchise can be the better economic answer. You keep the upside and the control. But be honest with yourself about your bench strength. A flag without an operator behind it means you own every mistake alone.
Five: and here is the option almost nobody talks about. If you own a smaller property, you do not need a brand name at all. Hand the management to a specialist - an operations consultant who runs your hotel against commonly agreed deliverables: occupancy, GOP, guest scores, staff retention. Not brand standards written in a head office far away, but numbers you and the specialist agree on together. You keep the upside, you keep the control, and season by season you build your own name instead of renting someone else's flag. I have watched small owner-run hotels hold their own against the big flags on exactly this model.
Six: signing the contract is the beginning, not the end. A beautifully negotiated agreement does not run a hotel. Read the monthly P&L like it owes you money, because it does. Ask the uncomfortable questions in owner review meetings. Asset management is not a quarterly email. It is a discipline.
One caution. A lawyer quoted in the piece said something wise: the result today is not an owner-friendly contract but a more negotiated, asset-specific one. Exactly right. Do not walk into these talks trying to win. Walk in trying to build a partnership where both sides make money when the hotel performs, and both sides feel it when it does not. The best contracts I have seen are the ones nobody ever had to enforce, because the incentives were honest from day one.
For years, owners signed operator-drafted contracts with little room to negotiate. Those days are ending. If you own a hotel, or you are building one, this is your moment to sit at the table with your eyes open and your numbers ready.
Use it well. And when the contract is signed, the hotel is running, and the P&L is honest, that is when this business makes you soul happy.
HPRD
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