The main objective of this agreement is that investors in some hotels do not have the capacity and knowledge to operate them. They are only businessmen who have a good financial situation. They lack experience or expertise in this area. Therefore, they need the support of these management companies who can obtain the production of their investment. [10] In Asia, many hotels work under management contracts, as they can easily achieve economies of scale, global booking systems, brand awareness, etc. It is not uncommon for contracts to be signed for 30 years and have a royalty of up to 3.5% of total turnover and 6 to 10% of gross operating margin. Management contracts have been widely used in the aviation industry and when foreign government measures limit other methods of entry. This contract is usually concluded by the client (investor) at the beginning. The relationship between the client and the management contractor usually includes both pre-construction work and construction activities. [12] The management contractor is responsible for all administrative and operational work of the construction project. The investor is usually in the picture to hire the management contractor and then when the construction of the project is completed. All work between these two events is carried out by the management contractor.
[13] The Executive Contractor is responsible for subcontracting requests arising from its own defective performance. These are the elements to be included in a project and the design of these elements, with the management expertise of an organization of contractors, to help and advise in the development of the design, coordinate the interface between design and construction, carry out construction and planning and stay within the limits of the target costs and delivery time of the project. [14] The hotel management contract is a written agreement between the owner and operator of the hotel. The basis of this relationship is that the operator takes care of the daily work of the hotel and assumes all the additional responsibilities such as maintenance, front office, housekeeping, food and beverage handling and sales. The contract management company has the power to recruit and dismiss employees. The owner will authorize and pay for the capital project of the hotel, but the responsibility will be entrusted to the operator. Hotel management contracts can be long and complicated. The negotiation of this agreement, which concentrates the power of the owner and the rights of the operator. The first project is proposed by the potential operator. It is usually in favor of the operator, which allows the operator to look for a long-term contract.
He does not want interference from the owner, but at the same time a continuous provision of investments for the expansion and growth of the project. [9] In the management of the business, franchising is a contractual relationship between the franchisee (business owner) and the franchisee (buyer of a brand). .
