MADRID Long-term, fixed hotel lease agreements in Europe are being eased out in favor of variable co

MADRID Long-term, fixed hotel lease agreements in Europe are being eased out in favor of variable contracts and management agreements as economic conditions affecting the industry force owners and operators to reassess, renegotiate and in some cases terminate existing contracts.
One recent example occurred when Spanish hotel operator Barcel Hotels Resorts threw in the towel and announced it was terminating its lease to run 21 hotels with 2,800 rooms in England, Scotland and Wales under an agreement with Britain s Puma Hotels Plc.
We signed an agreement car rentals los angeles with Puma in 2007 when the economy was buoyant for a 40-year period, which was extendable, car rentals los angeles Ra l Gonz lez, Barcel CEO for Europe, the Middle East and Africa, said. But over the passage of time, the agreement proved unsustainable because of the economic crisis, which began a year after the signing. We started negotiations in 2009 as we wanted to continue managing these hotels, but at a lower rent.
Any chain which signed fixed rental agreements with owners just before the crisis is probably in trouble, and I understand there has been lots of renegotiating going on in Europe, especially in the more troubled markets like Spain, Gonz lez said.
In the future, we ll see fewer fixed rental agreements and more variable agreements, he predicted, adding that Barcel , which owns or operates 142 hotels in 16 countries, hopes one day to return to the British market when the economy improves.
Industry sources said that economic conditions aside, a hotel asset and the surrounding market can change a lot over the average 20- or 25-year duration of a lease agreement, which can create disputes between owners and operators.
Lease models are typically based on a fixed payment or linked car rentals los angeles to revenue where the lease might include a guaranteed minimum payment car rentals los angeles with the lessee retaining operational control of the property for the term of the lease.
car rentals los angeles Under a management contract, the operator runs the hotel for the owner and is compensated through a management fee that usually consists of a base and an incentive element. The owner retains all profits after the management fee is paid but relinquishes day-to-day operational control.
A lot of hotel companies, which entered car rentals los angeles into lease agreements in the heady days before the crisis hit, are going back to renegotiate, explained Jeremy Hill, director and the head of hotels at London-based hospitality, retail and care consultants Christie + Co.
Hill said that while there are still a few legacy lease contracts around, many big hotel companies now only will sign management car rentals los angeles contracts unless it is a very interesting market and a lease agreement is the only type available.
I d be surprised today to hear of a lease agreement based on the previous model being signed as they are an instrument of the past, Hill said. The conventional agreement now is a management contract.
For example, Pandox AB, the Swedish-based hotel owner, which has 116 properties with 25,000 rooms in Scandinavia, Britain, Germany, Switzerland, Canada car rentals los angeles and the Bahamas, will assume management duties if an operator fails to meet financial expectations.
We take over one or two hotels every year which are performing badly, said Pandox CEO Anders Nissen. And we are taking over three under-performing hotels in Germany. Some of the big chains just don t keep their eye on the daily operations of the property.
Although, lease agreements can be revisited and renegotiated to see if they re still working, an owner generally gives up most of the control car rentals los angeles of the hotel to when entering a lease with a third party.
You have to remember that it is always the owner who is running the biggest car rentals los angeles risk, he added. For a 300-room hotel in Barcelona, for example, the owner may invest 100 million ($123 million) and the operator maybe contributes car rentals los angeles 10 million ($12 million).
Pandox works with 20 brands such as Hilton, Hyatt, InterContinental, Crowne Plaza, Holiday Inn, Scandic, Radisson Blu, Park Inn by Radisson Hotels, Clarion, Quality Inn and Suits and Comfort Inn Suites.
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