Hotel management contracts. Some recent trends in relation to dispute resolution in Australia

Abstract

Hotel management contracts represent the legal instrument which traditionally defines the duties and obligations of hotel owners and operators. In the 1960s and early 1970s such contracts were written largely in favour of the operator who received a range of fees, entitlements and lengthy tenures under the lease agreement and rarely contributed investment capital. However, in the period 1987 to 1994 as a result of the impact of the world recession on hotel operators and investors, management contracts have been redefined in favour of owners. The change has been characterised by investors and bankers insisting on operators undertaking performance and profitability based clauses, shorter terms of years under the lease, and equity contributions. This paper will emphasise that where disputes between owners and operators have occurred in Australia, litigation has not been generally pursued before the Courts. Indeed, a recent survey of hotel management contracts reveals that dispute resolution clauses and mediation have now become a realistic alternative to the settlement of potentially litigious issues between hotel owners and managers.