Management Rights: A capital-light strategy for hospitality investment

In Australia’s evolving accommodation investment market, management rights are a strategic, high-yield alternative to traditional hotel ownership.

“Management rights offer a unique entry point for investors who want operational control, recurring income, and asset-backed security – without the burden of full property ownership,” says Tim Mayoh, Senior Vice President, Hotels & Hospitality, JLL. “It’s one of the most accessible ways to enter prime hospitality markets while preserving capital for growth.”

Management rights provide operators with contractual rights to run and profit from the day-to-day management of strata-titled apartment complexes. The model typically combines:

• Caretaking agreements – contracted and CPI-adjusted salary paid by the body corporate to maintain the complex.

• Letting agreements – exclusive rights to lease units on behalf of individual owners.

• Lot ownership – often the manager’s residence and office, with some agreements allowing for separation of the real estate from the business.

• Tenure – agreements usually run from 10 to 25 years, providing income stability and business continuity.

This structure creates predictable revenue supplemented by letting commissions and ancillary income streams including cleaning, linen hire, and guest services.

The model's capital efficiency represents a significant advantage over traditional hotel ownership. While freehold coastal hotels generating $1 million annual profit often require circa $11-14 million investment, comparable holiday letting management rights businesses can be acquired for $4-6 million.

"This capital efficiency means investors can enter sought-after markets with far less financial exposure," says Gareth Closter, Senior Vice President, Hotels & Hospitality, JLL. "It allows them to preserve equity, diversify portfolios, and achieve strong returns with lower gearing risk."

By avoiding exposure to land value volatility and large-scale capital upgrades, operators can focus on guest experience, operational efficiencies, and incremental profit growth, which increases business sale value.

Revenue streams include:
 

• Caretaking Fees: Contracted, CPI-adjusted annual income from body corporate

• Letting Commissions: Percentage of gross rental income from managed units

• Ancillary Income: Cleaning, linen, guest services, internet charges, and maintenance

• Capital Growth: Rising net profit increases business valuation multiples and associated real estate value

Management rights provide day-to-day operational control while shielding investors from major ownership risks, including no responsibility for structural repairs or building capex, limited exposure to property market fluctuations, and operational flexibility from on-site management to remote oversight. This balance of control and protection appeals to both lifestyle operators and institutional investors.

The model attracts a broad spectrum of buyers, from individuals seeking a sea-change, business with residential perks, to established owner operators leveraging brand and distribution power. It also appeals to:
 

• Lifestyle Operators: Individuals or couples seeking an income-generating business with residential benefit

• Established Branded & Independent Owner Operator Groups: Existing operators with the strength to drive upside through centralised resources, enhanced distribution power, brand recognition and loyalty. Examples include Minor Hotels, Clixx Hotels & Apartments, Collective Hotel Management and atHotels.

• Accomplished Hotel Employees: Looking to leverage hospitality experience into personal wealth through business ownership

• Private Investors and Syndicates: Groups expanding portfolios to create scale and institutional-grade returns, with the option of engaging in a management or franchise agreement subject to their desired strategy. Accor, Wyndham Hotels & Resorts and Minor Hotels offer both management and franchise solutions for owners.

• Family Businesses: Multi-generational ownership structures offering financial security and operational involvement.

Management rights businesses can expand through portfolio acquisitions, service consolidation across sites, and brand standardisation. The sector's median national valuation multiple of approximately 4.5x net profit underpins strong buyer demand and liquidity.

"This is a business model where you can start small and scale methodically," notes Tim Mayoh, Senior Vice President, Hotels & Hospitality, JLL. "Operators have flexibility to build portfolios, centralise services like laundry or maintenance, and align with recognised brands to drive higher occupancy and rates."

Queensland overwhelmingly remains the most established market with agreements up to 25 years, while other states including NSW, Victoria, NT, and WA operate under shorter agreements. Despite this variation, successful operations exist nationally, proving the model's adaptability. Opportunities exist to extend or top-up agreements, preserving long-term value through contractual protections around exclusivity and fee structures.

In uncertain markets, management rights provide high-yield returns, reduced capital requirements, operational autonomy, and growth flexibility. They represent not merely a second-tier alternative to hotel ownership, but for many investors, a superior investment strategy.

As Mayoh concludes: "The model has proven its resilience over decades, offering predictability and upside. For investors seeking capital-light, cashflow-strong hospitality businesses, management rights are a compelling pathway into the sector."