Spa Management Agreement

A purchase contract (SPA) is a legally binding contract between two parties that initiates a transaction between a buyer and a seller. SPAs are generally used for real estate transactions, but can be found in all areas of activity. The agreement concludes the terms of the sale and is the result of negotiations between the buyer and the seller. A revenue-sharing model is the easiest option for both parties in many ways, but don`t ignore the many potential issues that could lead to conflict. As with any contract, when entering into a revenue-sharing model agreement, it is essential to be clear about the rights and obligations of each party. The most common causes of disagreement in these contracts relate to the billing and payments of guests, as well as the sharing of operating costs between the parties. Depending on your needs and strategic objectives, ExclusivelySpa offers different forms of cooperation that can be tailored to your needs, from standard management contracts or joint ventures to management consulting. There are many clauses within an AHH that may need to be reviewed and reconsidered when existing contracts are amended or new contracts are developed. It will be a renegotiation process, as there will likely be a long-term agreement.

Below are some of the key areas you need to focus on if you are able to renegotiate your current agreement or keep an eye on future contracts. Many of the following changes require lender approval, but this document will not answer lenders` questions. COVID-19 has linked the hospitality industry to many uncertainties for the future. Several vulnerabilities and risk areas have also been highlighted in the framework of hotel management agreements (HMA). As these weaknesses become more apparent, it`s important to decide where to focus, how to adjust them in the future, and how each party can make the necessary adjustments to help each other. The GOR, which forms the basis for calculating the basic management costs, includes all direct or indirect income from the holding, such as the income of the . B.B rooms, revenue from branded property rental programs, food and beverage revenues, service fees, laundry fees, telecommunications revenues, spa, wellness and fitness facilities revenues, banquet and restaurant revenues, parking revenues, and bill of exchange commissions. Global Asset Solutions, your lead partner in hotel asset management, has teamed up with a team of five students and an alumnus of the Ecole Hôtelière de Lausanne, recognized by industry leaders as the best hotel school in the world. Together, we are working to implement best practices to help hotel owners and operators survive the COVID-19 crisis. By combining careful research, expert advice and in-house experience, we will publish best practices on the latest topics in our industry. The APAC team consists of Paloma Guerra, Mingze Li and Zhaoyu Zhu, while Eliana Levine, Larina Maira Laube and Vani van Nielen form our UE&US team and Remy Rein (EHL speaker). Of course, every agreement has two sides.

However, as an asset manager, it is our responsibility to protect the interests of the owner, as can be seen in the following content. However, it is important to recognize the importance of the rights of the operator. After all, everything revolves around the hotel and each party has to make concessions to support its successful sustainability. Since the central principle of the agreement is revenue sharing, both parties must have full control over the revenues generated. Most hotels prefer guests to offload spa treatments to their room account. Most hotel guests prefer it too, which ensures that the spa operator is not tempted to deceive the hotel about its income by not letting it go through the payment or point-of-sale system. SPAs also contain detailed information about the buyer and seller. The agreement records all deposits made in the run-up to the negotiations and notes parts of the agreement that have already been completed. The agreement also specifies when the final sale is to take place. Still, there will sometimes be guests who prefer to pay directly at the spa. Again, the administrative provisions should reflect the interests of both parties and, while respecting the interests of the above-mentioned owner, the conditions of the brands and operators should be respected.

At the end of the day, the two parties should work together to maintain the hotel. The above clauses are either affected by COVID-19 or the pandemic has revealed its weaknesses and need to be adjusted and renegotiated depending on the hotel and contract. Please contact us at info@globalassetsolutions.com, we would be happy to offer you our services, evaluate your management contract and develop an action plan so that you can move forward… Deciding on the right financial structure for the deal is the first step, and usually one of the two financial models is chosen. First, there is a direct revenue sharing model. This would result in the hotel receiving a percentage of the spa`s revenue, no more. Then there`s what I call the Fee & Profit model. In this model, the spa operator receives a percentage of the SPA`s GOR (Gross Operating Income) and a percentage of the Spa`s GOP (Gross Operating Profit). The rest of the GOP is kept by the hotel. Let`s take a closer look at the variations within these models.

In another example, a PPS is often needed in a transaction where one company acquires another. Since the SPA determines the exact nature of what is being bought and sold, the agreement may allow a company to sell its tangible assets to a buyer without selling the naming rights associated with the company. That is, the appointment of a spa management company. It`s a business model that makes sense for hotels. After all, most hotel operators themselves are essentially employees of hotel management companies. Of course, it could be the owner of the hotel who finally pays his salary and signs his employment contract, but in practice they are appointed by the management companies. A smart spa operator would also include benefits for its management team similar to those of the hotel department heads, for example, 50% discount on food in the restaurant, free rooms for the headquarters team to inspect the operation, etc. The appointment of a good spa management company for the operation of the spa allows hotels to offer their guests a high-quality spa offer without having to the headache to do it themselves. Obviously, the hotel usually has to give up a significant portion of the revenue, and there are a number of other considerations. Since the fundamental principle of the agreement is revenue sharing, both parties must have full control over the revenue generated. Most hotels prefer guests to charge spa treatments from their room account.

Most hotel guests also prefer this, and it helps ensure that the spa operator is not tempted to trick the hotel into revenue by not taking it through the payment or POS system. Still, there will sometimes be guests who prefer to pay directly at the spa. Sales issues aren`t the only problem. The distribution of expenses is another area that requires special attention when negotiating contracts. If the spa uses facilities shared with the hotel, what happens to the distribution of utility costs such as electricity and water? If the air conditioning is centrally controlled, how does the hotel charge the spa for its share of this cost? The same goes for the water costs for the spa showers. .

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