While average base fees have experienced a slight decline from 1.7% to 1.6% of revenue, incentive fees have steadily declined through the years, reaching 6.6% of gross operating profit (GOP) or adjusted GOP in our latest 2024 survey. Incentives fees are also increasingly being tied to performance against GOP thresholds. This shift rewards operators to deliver stronger profitability, aligning their interests with those of the hotel owners.

While management fees decrease, there has been a rise in sales and marketing fees. Fees above 3% of Room Revenue increased by 32 percentage points from the 2018 survey, whilst fees above 3% of Total Revenue rose by 16 percentage points. The opacity and complexity surrounding these fees have raised concerns among owners, creating a need for greater transparency and comparability across brands.

While we see movement across various commercial terms in Hotel Management Agreements over the last 20 years, we expect further changes in the next decade as the operating landscape in Asia Pacific evolves.

Incorporation of franchise arrangements in the HMAs are expected to rise with the growth of white-label operators in the region, coupled with hotel owners looking for more control. ESG (environmental, social, and governance) provisions will be integrated into management contracts to align interests of both Owners and Operators with the latest guidelines from the government, regulatory authorities and industry organisations.

Termination provisions will continue to be a key point of negotiation as higher liquidity and hotel sales in Asia put a significant premium on vacant possession (terminable HMA) assets. A middle ground needs to be sought on providing Operators the assurance of undisturbed operations while providing Owners with flexibility on their divestment options.