Maldives: Inking a hotel management agreement

The rise of branded hotels in the Maldives is now common place. More and more hotels which started off or identified themselves as independent hotels are now converting to branded hotels.

What are branded hotels and independent hotels? Independent hotels are those that are owned and operated by the owner. Branded hotels are those that are run by a hotel management company while the ownership of the property remains with the owner.  There also are those brands who own and operate properties.

Supply and demand aside, much goes into the securing of a hotel management contract in the Maldives. For a brand to identify a target property to completing negotiations and inking a contract can easily take a few months to half a year.

What is actually a hotel management agreement?

In simple “Maldivian” context, it is a contract between a resort owner and a hotel operator where the owner grants the right to the hotel operator to operate and manage the property for a fee but does not give any rights over the ownership of the property.

However, as things evolve, a hotel management deal may quite popularly involve elements and features of franchising and licensing in the transaction.

Even if the contract in its barest minimum is to hand over operation and management to an operator for a fee, today’s operator, by a being a branded hotel management company, often has a strong set of requirements.

One such requirement may be the requirement to use its name and brand. There comes the need for franchising.  The hotel management company may also require access to or use of copyrighted material or standards or systems as part of them coming into to manage the property. There comes the need for licensing arrangements.

Although there are notable exceptions, the common story is that a branded hotel operator would seldom own a property to be run as its branded hotel or resort in the Maldives. Often, the brand will be introduced to another person’s property, and a mix of hotel management, franchising and licensing features (including even funding of some sort at times) will all be bundled into the same deal – and as things are – it is likely that each of these elements in a hotel management agreement would be subject to a fee charged by the operator.