How to Choose a Hotel Management Company

Short answer

Choose a hotel management company on evidence, not promises. Check a track record you can verify with real hotels and their owners, the people who will actually run your hotel, a written scope, who employs the staff, the reports and approvals you keep, the full fee structure, the contract term and exit terms, and who owns the systems and accounts. Then compare candidates on their written answers to the same questions.

Two managers reviewing documents in a hotel room

Define what you need before you compare companies

A hotel management company runs part or all of a hotel on the owner’s behalf; the guide What Does a Hotel Management Company Actually Do? explains the roles in detail. Before meeting any company, decide what you want it to do, because a strong partner for online and commercial management is not automatically the right one for full management, and the reverse is also true.

Write a short brief: the property, its rooms and departments, its current results, the main problems, the scope you are considering and the role you want to keep. Give the same brief to every candidate. Proposals written against the same brief can be compared; proposals that each describe a different service cannot.

Check a track record you can verify

Every company describes itself well. What matters is what you can check. Ask for a list of the hotels the company manages now and has managed before, with the name, location, years and scope of each. A hotel where the company handled only branding or online sales is a different reference from one it ran in full.

Then verify. Visit at least one hotel the company runs today and look at the condition of the rooms, the reception and the back-of-house areas. Ask to speak to the owners, including an owner whose agreement has ended. Read the hotels’ public guest reviews over the period they were managed, as far as the platforms still show them. Ask who on the proposed team actually worked on those hotels, because a company’s history helps you only if the same people will work on yours.

Any results a company quotes should come with their basis: which hotel, which period, compared with what. Treat figures without that context as marketing. Check the team as closely as the company:

The person who would be your general manager or main contact, their background, and what else they are responsible for.
Who handles pricing, OTA accounts and reservations, and whether they are employees of the company or outside contractors.
Who supports the hotel on finance, recruitment and training.
Who you call when something goes wrong, and how quickly they are expected to respond.

Scope, staff, approvals and reporting

The scope should be written item by item: which departments, channels, systems and tasks are included, and which are not. Anything left out of the written scope can become a dispute later.

Who employs the staff needs a clear answer. In some arrangements the team stays on the owner’s payroll while the company recruits and directs it; in others the company employs the team. This affects payroll costs, legal responsibility under the labor law that applies, and what happens to the team if the agreement ends.

Owner approvals set the limits of the company’s authority. Common examples are the annual budget, spending above an agreed amount, building works and renovations, long contracts with suppliers or corporate clients, and the appointment of the general manager. Reporting belongs in the same document: the contents, the accounting format and the delivery dates. So does technology access. The following accounts and data should be in the hotel’s name, with administrator access for the owner:

The property management system (PMS) and its data, including guest and booking history.
The channel manager, the booking engine and the OTA extranets, such as Booking.com and Expedia.
The website, the domain name, the Google Business Profile, the social media accounts and the hotel’s email addresses.
Bank accounts and payment systems, with the company’s access limited to what its role requires.

Fees, contract term and exit

Fee structures vary with the scope, the size of the hotel and the market, so compare structures rather than headline numbers. Common elements are a base fee linked to revenue, an incentive fee linked to profit, a fixed monthly fee, and separate fees for work such as pre-opening. For each element, ask exactly which revenue or profit figure it is calculated on, as defined in the agreed accounting format.

Then ask for every other cost the hotel will carry: company staff or central services charged to the hotel, travel, software and system licenses, marketing contributions and any purchasing arrangements. A low fee with many added charges can cost more than a higher fee that includes them.

The contract term and the exit matter as much as the fee. Check the initial term and how it renews; whether there is a performance test that lets the owner end the agreement if agreed targets are missed; the notice periods; what happens if the hotel is sold; and the handover duties when the agreement ends, covering accounts, data, documents, staff and system access.

Many disputes can be prevented by writing things down at the start: the scope, the budget process, approval limits, KPI definitions and a regular owner meeting. The agreement should also say how a disagreement is escalated and, if it cannot be settled, which method and which law apply.

Questions to ask every candidate

Ask every company the same questions, in writing where possible, so the answers can be compared side by side:

Which hotels do you manage now, which have you managed before, and can I speak to their owners?
Who exactly will work on my hotel, and what else are they responsible for?
What would you change in the first months, and how will we measure it?
Who will employ the staff, and what happens to them if the agreement ends?
Which decisions need my approval, and what are the spending limits?
What will the monthly report contain, in which format, and on what date?
How is each fee calculated, and what other costs will the hotel pay?
How can either side end the agreement, and what will you hand back?
Will all accounts, systems and data stay in the hotel’s name?

Common mistakes and red flags

Some warning signs appear early, in the first meetings or the first draft of a proposal. Watch for them, and for the mistakes that are easy to make when choosing:

Promises of specific results before the company has seen the hotel and its figures.
References that cannot be checked, or no former client willing to speak.
A vague scope, such as complete support or total management, with no list of tasks.
Reluctance to put fees, extra costs or exit terms in writing.
OTA accounts, the website or the domain to be opened in the company’s name.
A long initial term with no performance test and no practical way to leave.
Choosing on the lowest fee instead of on the team, the plan and the quality of reporting.
Signing before the full agreement has been read by your own lawyer and accountant.

A selection process, step by step

First, write the brief and decide the scope you are considering.

Second, shortlist a few companies that manage hotels similar to yours in type and market.

Third, send each the same brief and questions, and ask each to visit the hotel and review its figures before proposing anything.

Fourth, verify the references: visit hotels they run, speak to their owners and meet the people who would work on your hotel.

Fifth, compare the written proposals on scope, team, plan, reporting, total cost and exit terms, then negotiate the agreement with legal and financial advice.

Finally, plan the start: the handover of systems and accounts, the budget, the approval limits and the first monthly report.

MMC Hotels works at three levels, and the checks in this guide apply to each: Build (Hotel Brand & Digital Setup), Grow (Online Hotel Management) and Manage (Full Hotel Management). Revenue and distribution management, pre-opening, operations management, staffing, training and hotel development are also offered on their own, so an owner can assess MMC on the scope the hotel actually needs.

FAQ

Questions Hotel Owners Ask

How do I verify a hotel management company’s track record?

Ask for a written list of the hotels it manages now and has managed before, with names, locations, years and scope. Visit at least one hotel it runs today, speak to the owners, including one whose agreement has ended, and read those hotels’ public reviews over time. Then check that the people who worked on those hotels are the people proposed for yours.

Should the owner or the management company employ the hotel staff?

Either can work; the choice depends on the agreement, the labor law that applies and the owner’s preference. If the owner employs the team, the company recruits and directs it, but the legal obligations stay with the owner. If the company employs the team, those obligations move to the company. Decide before signing, including what happens to the staff if the agreement ends.

What is a performance test in a hotel management agreement?

A performance test is a clause that lets the owner end the agreement if the operator misses agreed targets over a set period. Targets are often based on the budget or on a comparison with a group of similar hotels. Some agreements let the operator avoid termination by curing the shortfall, for example by paying an agreed amount. Terms vary widely, so read the definitions and the measurement method carefully.

How long should a hotel management contract be?

There is no standard length that suits every hotel. A longer term gives the operator time to build the hotel’s results; a shorter term gives the owner flexibility. Whatever the term, the owner should be able to leave if agreed performance targets are missed, and the notice periods, renewal rules and handover duties should be clear and in writing.

Should I choose the company with the lowest fee?

Not on that basis alone. The fee is one line in the hotel’s results, while the company’s decisions on pricing, staffing and costs affect many others. Compare the team, the plan, the reporting and the total cost including extra charges, then negotiate the fee once you are sure you are comparing like with like.