MIHM304 Hospitality Property Management and Development Strategies

Negotiating the Hotel Management Agreement

You are the Director of Acquisitions and Development for Greenhill Suites. Your role within the Hotel Company is to grow and develop the number of hotels within the company’s portfolio. Greenhill Suites started in the United Kingdom two decades ago and is now one of the most recognised 4-star hotel brands in the world. The hotel caters to a variety of target markets but is particularly loved by the corporate market because of the consistent level of service offerings and affordable pricing.

The hotel’s unique selling points are the complimentary fast-fibre connected WiFi throughout the hotel and comprehensively fitted-out business centre that the corporates just love. Each hotel houses the signature business centre with a dedicated staff to assist guests in basic secretarial duties like photocopying, faxing, research and on the ground assistance that the corporate clients would normally only obtain in a luxury 5- star executive floor service. The hotel also includes as a standard the complimentary continental buffet breakfast with every booking at the brand standard Go Green Cafe. Guest can choose to upgrade this to a full cooked breakfast for an additional charge. The Go Green Cafe’s unique selling point is the daily fresh fruit juices and healthy meal options with fresh ingredients and loaded with superfoods.

These offering and complimentary additions have placed the brand highly on the preferred listing of many major companies. The hotel brand is currently the preferred accommodation provider for several large blue- chip companies like Telstra, BHP, Microsoft and HP.

Greenhill Suites now have a total of 115 hotels worldwide with approximately 40% of the portfolio owned and operated by the company, with the remaining 60% under management. Last year you had successfully negotiated and signed on a Greenhill Suites hotel in Tasmania making it the 23rd hotel in Australia but have struggled to achieve a presence here in Adelaide and Alice Springs. The lack of a presence here in Adelaide is starting to take its toll from pressures from the corporate buyers. Without a hotel presence in the South Australian city, these corporate clients are having to negotiate rates with other hotel brands there. This is not only unproductive for those buyers but a real risk that Greenhill Suites could lose out to a competitor especially when they’ve got a foot in the door via Adelaide.

The board of directors are very concerned about this and have instructed you to focus on gaining ground in Adelaide. You had attempted to secure a management agreement with a new development due to be opened in 2020 but had lost out to Allwood Hotel Group which will be branding it as an Allwood Styles. Rumours of another development in the CBD have surfaced, but the 80-room is a little too small for the Greenhill Suites concept making it unfavourable. The owners were going to operate the hotel themselves under a self-branded MuMu Hotel but due to lending pressures, they are now keen to explore a branding partnership with Greenhill Suites. Discussions with this party is still ongoing.

In the meantime, you’ve been given the opportunity to present to James Canavan from The Regency Group. Their proposed development is a 110 room 4 star serviced apartment style hotel. It is the right size and the scale is perfect for a Greenhill Suite, but the concept plans currently does not include the brand standard offerings typical for a Greenhill property. However, this can easily be changed as part of the Technical Assistance Agreement you can offer the owner. The location of the hotel is also not as favourable as you’d much prefer a hotel in the CBD. But financially a 110-room hotel will provide much better returns than an 80-room hotel. You understand that James have considered operating the property himself and you are also aware that other hotel companies have approached them for an agreement. Due to the pressures from the board, you are highly motivated to secure this contract.

You are to negotiate a Letter of Intent with The Regency Group’s – Owner’s Representative. The board has authorised you to negotiate the terms of the key items on the HMA and to only sign off if it is a good deal. You are not to disclose this document to your counterpart. The following has been prepared for you in accordance with the company policy and guide for negotiations. Everything is negotiable.

Task

1.Negotiate and complete a Letter of Intent.
2.The operator should be the first to make an offer. CC a copy to Aaron Oh on all formal letters.
3.Use template attached, modify as necessary.
4.Word the terms of the offer using examples found in the references below or from any other resources.
5.Achieve a deal, make concessions where necessary and keep priorities in order.
6.Include a 300-word equivalent conclusion and self-reflection on the negotiation process.