Author: Blank Rome LLP

By Mark S. Adams —

Blank Rome LLP was proud to serve as a sponsor of the 2026 Boutique Hotel Investment Conference, where the firm’s multidisciplinary Hospitality team was represented by three speakers across the event’s program. As my colleague David Sudeck, Esq. details in his companion post on this blog, the conference brought together a dynamic cross-section of owners, operators, investors, and developers focused on the boutique and lifestyle hospitality sectors.

I had the privilege of participating on a panel titled “The Management Agreement Decoded,” alongside Irina Zavina, Founder of Haskil Partners. Our session was designed for hotel owners and focused on how to negotiate hotel management agreements (“HMAs”) from the ownership perspective – maximizing leverage, protecting economic interests, and structuring deals that position owners for long-term success. Below are the key takeaways from our discussion.

1. Negotiate the Shortest Workable Term and Watch Renewal Deadlines

Hotel management agreements can run anywhere from 5 to 50 years – and I’ve seen one agreement for as long as 90 years. In the boutique and lifestyle space, however, owners often hold more leverage than they realize. In the lux boutique space, your property probably represents a meaningful share of a brand’s portfolio – say 15 percent of their total properties – so you have real negotiating power. Use it to secure the shortest initial term possible, with renewals conditioned on earned, demonstrated performance rather than granted automatically. Pay close attention to renewal mechanics: some agreements include automatic renewal clauses where missing a 30-day opt-out window can lock you back in for another full cycle.

2. Understand and Prioritize Your Termination Rights

Termination rights are your most important area of focus. Three categories deserve special attention:

• Performance Test: Brands rarely fail formal performance tests because cure rights allow them to pay the shortfall and reset the clock. And, typically, the clock does not even start for five years. To make this right meaningful, negotiate to shorten the testing window to start at three years so you can evaluate the relationship early.
• Termination on Sale: This is the single most important termination right. An unencumbered hotel – one not locked into a long-term management agreement – is typically worth significantly more on the open market. Securing the right to terminate on sale creates real, measurable value for ownership because the in-coming owner will have its own vision for the property and management company.
• Liquidated Damages / Termination Fee: These are fairly standard, but the fee amount (whether calculated on 12 months trailing management fees or 36 months trailing management fees) can be negotiated down at the outset.

Bottom line: If you are forced to concede one termination right, I would give up the performance test – brands almost never fail it anyway. Termination on sale is by far the most critical right to retain.

3. Secure the Right Approval Rights

Owners should fight for three key approval rights:

• Annual Operating Budget: Ensuring you have meaningful input into how the property’s operating budget is set each year.
• Capital Expenditure (Capex) Reserves: Negotiate what is required for the FF&E reserve, particularly with boutique properties where there may not be a particular standard and differ from property to property.
• General Manager Selection: I consider this the most important approval right. The general manager is the primary touch point for service quality and guest experience – the person who ultimately delivers on your brand promise every day.

4. Don’t Overthink the SNDA

The Subordination, Non-Disturbance, and Attornment agreement (“SNDA”) is a three-party agreement between lender, owner, and brand. Its primary function is to protect the brand’s position in the hotel if the lender forecloses. My view: the owner does not have much at stake in this particular negotiation. The SNDA is an easy concession to grant in full – save your negotiating capital for the issues that drive real economic value.

5. Negotiate the Payment Waterfall

Disputes in HMAs are almost always about money. One of the most effective tools for preventing conflict is a well-structured payment waterfall. Can the brand take management fees only after payment of debt service, or, after essential expenses like property taxes and insurance? Negotiating the waterfall correctly at the front end creates a true partnership dynamic between owner and operator – and significantly reduces the likelihood of disputes down the road.

6. Do the Work at the Front End

In 20 years of hospitality litigation practice, based on hundreds of arbitrations and mediations, and thousands of grievances, the common thread across all of them: disputes over money. The best protection an owner can have is thorough, disciplined front-end negotiation. As I tell my clients, the goal is to negotiate terms so good that you never need to call a litigator like me.

For a deeper dive into the strategies and examples discussed during the panel, I encourage you to watch the full session recording: Watch “The Management Agreement Decoded”.

Stay tuned to Hospitality Industry Insights for continued analysis and practical guidance on the legal and business issues shaping the hospitality industry. Our team is here to help owners, operators, investors, and developers navigate the complexities of this dynamic sector.