What Hotel Owners Need to Know Before Signing a Hotel Management Agreement

By Mohamed Darwish | Founder of Darwish Legal Consultants - Specialist in Hospitality Law, UAE

One morning, a friend of mine, who happened to be a hotel owner, gave me a call. The tone in his voice made me guess that he was a bit frustrated, if I may say so.

“I was under the impression that this operator was going to attract many guests and bring the hotel to a higher level,” he said. “Now, I’m in the red and can’t get out of the contract, not to mention that I’m five years in.”

This was not the first time and certainly not the last time I had such a chat with a friend.

Plus, I have also faced this problem from different people, especially from hotel owners in the UAE and the GCC. Those owners who are stakeholders, and they get a share of the profit and loss, often expect to benefit greatly from a partnership with the international brand. Indeed, most of the time they do benefit from these deals. The brand is wonderful, the brochures assure international acclaim, and the operator's team is having a great time.

After the launch event, what follows next?

It is there that the actual story unfolds— and it is there they finally go through the painful realization that they no longer have the power to run their own property.

What Is an HMA — and Why It’s Not Just a Formality

A Hotel Management Agreement is not just another contract. It is an agreement that ties you to the operator for the long term, often for 15-25 years, during which the operator takes full charge of your hotel.

Let me make it clear: the biggest chunk of HMAs are written by the legal team representing the operator and their point of view, not yours.

The typical scenario goes like owners think that the brand will benefit them the most. It can be true for a while. However, when the conditions change, the contract will determine what to do then.

After that, the opportunity is no longer available – the damage has been done.

The Hidden Risks Most Owners Don’t See

Taking into consideration how Darwish Legal Consultants conduct their businesses, they are capable of the review and negotiation of HMAs across the UAE, Saudi Arabia, and other GCC countries. In the course of time, we have noticed quite a few situations which are indeed sort of traps, the owners have fallen into:

1. No Performance Clause

Even if the operator underperforms or mismanages the hotel, they still get their fees. You, the owner, absorb the losses.

2. You Can't Terminate (But They Can)

According to certain contracts, the operator has authority to walk away even when the hotel is in operation; or even more, the operator is allowed to assign the agreement unto another brand behind your back! without your approval. But you? You're locked in.

3. Unclear Charges and Corporate Fees

Altogether with all the technology, marketing, and loyalty programs, the central services will be available. But, when it comes to getting information on them, you are at the end of the line.

4. Loss of Decision-Making Power

You are being under more restrictive conditions than the direct approval of the GM. Under the circumstance of not being able to choose suppliers and not having the power to set room pricing, your hotel no longer belongs to you, but it becomes their operation.

A Real Story: When a Five-Star Brand Becomes a Burden

We had a case where a customer beyond his capacity approached us. His scenario was that he made a contract with a global luxury brand of 5 stars without the intervention of a legal professional. The hotel did not run as It was expected to, and, still, he could not end the contract. There was no performance test. He had to pay more in corporate charges than he made in profit.

He requested us to find an alternative, however, the agreement was so restrictive that the only practical solution was a considerable monetary settlement or, otherwise, to go through long, expensive arbitration.

He told me, “I’d have appreciated it very much if anyone had told me that before I signed,”

So from me, you are hearing it now.

Protecting Yourself Starts Before the First Meeting

Whether you are an owner, investor, or developer, you are the one, who has my sincere advice:

✅ Bring in a hospitality-focused lawyer early

Not just any lawyer. A professional who has deep knowledge of hotel operations, owner rights, and brand behavior in a particular region.

✅ Negotiate more than the fee

Concentrate on:

• Performance tests
• Termination rights
• Owner approval rights
• Audit rights
• Brand standards and investment caps

✅ Understand your long-term exit strategy

What if you have the intention to rebrand after 7 years?

What if you are going to sell the hotel?

What is going to happen in a dispute?

All these are not minor details. They rather determine a profitable investment from a headache in the long run.

What Makes Darwish Legal Consultants Different?

We are involved in the hospitality industry on a daily basis and do not deal with general legal matters.

I have been a part of this industry for more than 20 years, being on the commercial and legal sides as well. I have been in every nook and cranny of this business, from sitting at the boardroom table and negotiating with operators, to solve the disputes between the owners and the brands.

In Darwish Legal Consultants, we join:

• Legally correct solutions
• Operationally right decisions
• Commercially sensible choices

Are you planning to open a new business, rebrand, franchise, or are you in a dispute? At any of these stages, we will be there for you to make the most beneficial decisions, for your ownership, profitability, and your peace of mind.

A Final Word — From One Hotel Professional to Another

I am aware of the amount of passion that goes into the building of a hotel. The construction, the location, the staff, the guests' experiences—it's simply fantastic.

However, the lack of a good agreement in a short time can turn this fantastic ending into a legal issue.

If you run a hotel, it is your capital. Keeping a brand on the door is not a good enough reason to give away your control.

If you are in a position to sign an HMA or you have already gone ahead and would now like a second opinion, then please get in touch.