A management contract is an agreement between a hotel owner and hotel management company (The Hotelierz) under which, for a fee, the management company operates the hotel.
In a management agreement, The Hotelierz basically provides the same services as a franchise agreement, such as brand, reservation system etc., but on top of this, there is an agency agreement, meaning the brand operates the hotel, making all the day-to-day decisions on behalf of the owner. The group names a general manager, who will generally come from its own system, or will hire and train one for the specific hotel; he or she will hire the staff, and will control costs and revenue, food costs, apply brand standards, and generally supervise the management of the hotel. The General Manager reports to the Regional Director, who in turn reports to the Regional Vice President, and there are daily and monthly reports. However the bank account and local management company still belong to the owner. While input from the owner is welcome, interference in the day to day running of the operation is not allowed; otherwise it is no longer a management agreement. In other words, there is only one captain on the boat. Sometimes what may seem to an owner in the short term to be a wrong decision is often a good one in the longer term. So he has to put his trust in the management. At the beginning of each financial year, a budget is prepared and presented to the owner. It presents the projected revenue and operating costs, and once the cost structure is established, the manager must stick to the budget.