To initiate the process, the owner's objectives must be fully understood. Then suitable management companies are listed, bidding documents are prepared, and expressions of interest (EOI) and are solicited and collected.
Thereafter, the most suitable candidates are shortlisted, the commercial terms collected, the key provisions and performance criteria negotiated, and the MOU finalized. The memorandum of understanding (MOU) sets out the basic commercial terms by the operator on which the hotel management agreement package will later be drafted.
The operator selection process concludes with the preparation of the draft hotel management agreement (HMA), technical services agreement (TSA), and the pre-opening agreement (POA), their negotiation, and the closing.
The technical services agreement (TSA) governs the construction phase of a development project and details the plans and specifications for the new hotel submitted by the owner to the operator for approval, it setting forth the deadlines for construction milestones. The pre-opening agreement (POA) is that part of the TSA which governs a given period prior to hotel opening, setting forth the actions that the manager will take (at owner's expense) to get the hotel operationally ready for opening, such as property snagging, hiring staff, preselling rooms, etc.
Key Operator Responsibilities
Hotel owners engage operators to manage their properties on their behalf. They are generally responsible for the management of the supply chain, logistics, inventory, quality control, budget, and third-party relationships.
Depending on the property and the operating agreement between the owner and operator, the general manager (GM) may:
Hire staff and handle payroll;
Run the operational departments;
Manage vendor relationships;
Determine room rates and run promotions;
Perform property maintenance and recommend capital expenditures;
Develop budgets and produce financial reports for the owners;
Curate the hotel's online presence and implement marketing strategies; and
Coordinate renovations or expansions.
Except for the GM and possibly the financial controller, hotel staff is commonly employed by the hotel owner. This protects operating companies from the legal obligations associated with being an employer and makes it easier for owners to switch operators without needing to enter into new employment arrangements with staff.