Features

The Strategic Role of Advisors in HMA and Franchise Negotiations

Published

7 months ago

January 3, 2025

By Tatiana Veller, Managing Director, Stirling Hospitality Advisors

In the hospitality industry, the success or failure of a hotel often hinges on decisions made long before the property opens its doors. These decisions are embedded in the Hotel Management Agreement (HMA) or Franchise Agreement—contracts that define the operational framework, financial structures, and strategic alignment between hotel real estate owners and brands. When these agreements are well-structured, they create a partnership that drives operational excellence and financial performance. However, when misaligned, they lead to underperforming assets, strained relationships, and sometimes, failed investments.

As the industry continues to evolve, the approach to HMA and Franchise negotiations must adapt as well. This article explores the strategic role that hospitality advisors play in bridging the gap between owners and brands to create lasting, value-driven partnerships.

Rethinking the Traditional HMA Model: From Rigid to Adaptive Agreements

Historically, Hotel Management Agreements (HMAs) followed a fairly standard model, particularly in the luxury segment. It was common for contracts to span 20 to 25 years, offering brands long-term stability to establish themselves and maintain operational consistency, without any capital exposure. However, as the industry evolves, owners are challenging this rigidity, seeking shorter terms — typically between 10 and 15 years — to provide more flexibility. Shorter contracts allow owners to evaluate the property’s performance against market conditions and, if necessary, switch brands or exit the agreement altogether. Furthermore, owners are looking for terms that ensure the Operator’s financial reward is aligned with their own to keep ‘skin in the game.’

At Stirling Hospitality Advisors, we have been able to align both sides’ goals to construct agreements that strike a balance between long-term stability for the brand and flexibility for the owner. Instead of locking both parties into an inflexible structure, we recommend tiered agreements with initial shorter terms, followed by options for renewal based on performance benchmarks. For instance, an initial 10-year contract may include options to extend for five or ten years, contingent on the property achieving specific Gross Operating Profit (GOP) or RevPAR metrics. This approach ensures that the brand remains committed to delivering financial returns while giving the owner the freedom to adjust their business model and positioning based on the property’s actual results.

Adaptive agreements also offer risk mitigation for both parties. If the property underperforms, owners can renegotiate terms without being tied to decades-long contracts. On the other hand, brands are incentivised to maintain high standards to secure contract renewals. This flexibility is increasingly crucial in a rapidly changing market.

The Hidden Costs of Misaligned Interests: Protecting Owners from Financial Risk

While the visible costs in HMA or Franchise negotiations — such as base management fees, incentive fees, and marketing fees — are typically well understood, there are often hidden costs when the interests of owners and brands are not fully aligned. These costs may not be apparent in the initial negotiations but can emerge over time, particularly in areas like operational decisions, CapEx planning, administrative or IT costs and marketing budgets.

For instance, a brand may prioritise its regional marketing strategy or portfolio expansion over the specific financial health of an individual property. This could lead to inflated marketing expenses that don’t generate sufficient local demand. Similarly, CapEx decisions driven by the brand’s need to maintain its global standards — such as significant renovations — can impose excessive costs on the owner, especially when these upgrades do not result in a proportional increase in asset value.

Hospitality advisors will identify these potential misalignments early in the negotiation process, ensuring that fee structures, operational strategies, and CapEx plans are mutually beneficial. They ensure the brand and operator outline all costs associated with opening and running the hotel giving the owner full visibility. Moreover, they protect the owner’s financial interests while ensuring that the brand has the resources needed to maintain its standards.

By addressing these hidden costs upfront, issues that could lead to conflict or financial strain down the line are prevented, ensuring that both parties are fully aligned on how the property will be managed and operated.

Performance-Based HMAs: Driving Accountability and Success

A major development in today’s hospitality market is the shift toward performance-based HMAs. Traditionally, performance clauses focused almost exclusively on financial metrics such as GOP or RevPAR. While these remain important, today’s agreements increasingly incorporate non-financial metrics such as guest satisfaction, sustainability goals, and brand reputation management. This broader scope reflects the growing complexity of hotel operations and the heightened expectations of modern travelers.

Furthermore, sustainability has become a critical consideration for both owners and brands. Many guests are now prioritising environmentally responsible properties, and performance clauses that link incentive fees to energy efficiency, waste reduction, or water conservation can drive meaningful improvements. By tying financial incentives to broader performance metrics, owners can ensure that brands are fully invested in the hotel’s overall success, not just its bottom line.

Fee Structures Overview: Key Terms in HMA and Franchise Negotiations
A well-structured fee arrangement aligns both owners and brands on performance goals. Understanding common terms is essential, though each project requires customization based on unique goals and market conditions.

Base Management Fees: Typically, 1%-3% of total revenue for luxury hotels and 1.5%-2.5% for midscale/upscale properties. Fees often start at 2% and rise incrementally with property maturity.
Incentive Fees: Based on Gross Operating Profit (GOP), these range from 8%-12% for luxury hotels and 6%-10% for midscale/upscale. Tiered structures are common, with percentages increasing as GOP targets are met (e.g., 5% at 25% GOP, 8% at 50%).
Marketing Fees: Usually 1%-2% of total revenue to fund global and regional marketing efforts, with budgets tailored to the property’s market.
Technical Service Fees: These cover pre-opening support, with higher fees for luxury properties. Negotiating upfront provides cost control and ensures adequate brand support in early stages.

Fees are estimates from Stirling’s internal data and may vary by project. Stirling Hospitality Advisors tailors each agreement to the property’s specific operational and financial goals.

Bridging the Gap for Long-Term Success

In an industry as dynamic as hospitality, the way we approach HMA and Franchise negotiations must evolve. By helping owners and brands navigate this changing landscape by creating flexible, performance-driven agreements that align with both parties’ long-term goals. By focusing on fee structures, operational control, and tailored solutions, we ensure that each agreement serves as a solid foundation for long-term success.

As the industry continues to develop, those who adapt their approach to HMA and Franchise negotiations will be best positioned to lead the way in building lasting, profitable relationships.

Features

Redefining Real Estate: The Rise of Wellness-Centric Spaces

Published

4 months ago

March 14, 2025

Integrator Web-Editor

By Mark Phoenix – CEO of Sankari

The way we think about real estate is evolving, and at the heart of this change is a renewed focus on wellness. As we become more aware of the profound impact our living environments have on our health and well-being, it’s clear that real estate must go beyond aesthetics and luxury—it must support a lifestyle of vitality and longevity. To me, true luxury is no longer defined solely by opulence but by spaces that promote health, balance, and connection.

The demand for wellness-oriented spaces is growing rapidly, and real estate developers must rise to meet it. Today’s buyers are looking for more than just high-end finishes and exclusive locations—they want environments that enhance their well-being. Integrating wellness features such as fitness centers, yoga studios, meditation areas, and holistic health services is no longer an option; it’s a necessity. These spaces don’t just add value to a property; they create communities that create physical health, mental clarity, and social engagement.

Wellness-centric design is about more than just adding amenities—it’s about creating environments that encourage movement, relaxation, and human connection. By prioritizing well-being in real estate, developers can offer residents a lifestyle that aligns with modern values and aspirations. These spaces cultivate a sense of belonging, allowing people to come together in ways that enrich their lives beyond the walls of their homes.

Beyond individual benefits, wellness-focused communities have a lasting impact on society. As more people seek out homes that support their health, the real estate industry has an opportunity to lead this cultural shift. Developments that incorporate sustainable materials, biophilic design, and eco-friendly building practices not only benefit residents but also contribute to a healthier planet.

In the ultra-luxury segment, this focus on wellness is especially meaningful. The most sought-after properties are no longer just about extravagance—they are about creating a sanctuary where people can rejuvenate both physically and mentally. True luxury lies in thoughtful, health-driven design that enhances everyday life in meaningful ways.

Designing for wellness also means partnering with visionary architects and designers who understand the importance of both form and function. In regions with challenging climates, for example, innovative solutions can help reduce environmental impact while enhancing comfort and efficiency. Securing sustainability certifications like LEED further reinforces a commitment to responsible development and aligns with the global movement toward eco-conscious living.

For me, integrating wellness into real estate is more than just a trend—it’s a deeply personal mission and a strategic imperative. The places we live should do more than just shelter us; they should actively contribute to our health and happiness. By embedding wellness into the very foundation of luxury real estate, we’re not just shaping beautiful spaces—we’re shaping better lives.

Features

We are bringing tradition to every table in just five minutes

Published

5 months ago

February 20, 2025

Integrator Web-Editor

Exclusive Interview with Ashvin Subramanyam, CEO International Business, Orkla India

In this exclusive interview, Ashvin Subramanyam, CEO of International Business at Orkla India, shares insights on the brand’s participation at Gulfood 2025 and its mission to blend tradition with innovation in the Middle East. With the launch of Eastern’s 5-Minute Breakfast range and a refreshed Arabic spice portfolio, Orkla IMEA is redefining convenience without compromising on authenticity.

What can we expect from Orkla IMEA’s presence at Gulfood 2025, and how significant is this event for your brand’s growth in the region?

At Gulfood 2025, Orkla IMEA, subsidiary of Orkla India, is set to make a strong impact by unveiling the Eastern 5-Minute Breakfast range, designed to bring the authentic flavors of Kerala to the fast-growing ready-to-cook market in the Middle East. In addition, visitors can expect a refreshed Arabic spice portfolio, reflecting Orkla India’s continued commitment to catering to the diverse culinary preferences of the region.

Gulfood is a key platform for us as it enables us to showcase our latest innovations to a global audience, including retailers, distributors, and food industry leaders. The Middle East is a strategic market for our expansion. By blending tradition with convenience, our goal through this event is to become a household name across diverse communities in the region, reinforcing our commitment to quality, authenticity, and innovation in packaged foods.

How does Gulfood help Orkla IMEA connect with new markets, consumers, and industry partners, particularly in the Middle East?

Gulfood serves as a vital gateway for Orkla India to connect with new markets, consumers, and industry partners through its subsidiary Orkla IMEA in the Middle East. As one of the world’s largest food and beverage trade exhibitions, it provides an unparalleled opportunity to engage directly with key stakeholders, including retailers, distributors, and hospitality businesses, facilitating strategic partnerships and market expansion.

For Orkla India, this event is instrumental in understanding regional consumer trends, preferences, and evolving dietary habits, particularly in the fast-growing packaged food sector. The launch of the Eastern 5-Minute Breakfast range and refreshed Arabic spice portfolio at Gulfood allows us to showcase our innovation in convenience-driven yet authentic culinary solutions.

By participating in Gulfood, we strengthen our brand presence, foster collaborations with regional partners, and position ourselves as a trusted name in ethnic and mainstream food categories. It’s a key milestone in our vision to become a household name in the Middle East.

Eastern is set to unveil its preservative-free quick South Indian 5-Minute Breakfast range. What was the inspiration behind this concept?

The Eastern 5-Minute Breakfast range was inspired by the growing need for convenient, time-saving meal solutions that do not compromise on authentic taste and quality. South Indian breakfasts, particularly Kerala’s traditional dishes, are deeply rooted in culture, requiring significant time and effort to prepare. However, with modern lifestyles becoming increasingly fast-paced, many consumers struggle to recreate these meals from scratch.

Recognizing this shift, Eastern set out to bridge the gap between tradition and convenience by crafting a range that retains the authentic flavours and textures of Kerala’s most-loved breakfasts while eliminating the long preparation time. The preservative-free formula ensures that consumers enjoy fresh, wholesome meals made from high-quality ingredients in just three easy steps, ready in five minutes.

With this innovation, Eastern empowers busy professionals, young families, and expatriates to stay connected to their culinary heritage without compromising on their schedules, making traditional breakfast accessible anytime, anywhere in just 5 minutes.

Can you give us an insight into the development process behind this 5-Minute Breakfast range, especially in maintaining authentic South Indian flavors without preservatives?

The development process for our 5-Minute Breakfast range began with a deep understanding of our consumers’ evolving lifestyles and their desire for authentic Kerala-style breakfasts that eliminate a lengthy preparation process. We identified a unique need-gap: while traditional dishes like Puttu, Appam, and Idiyappam are much-loved, the time and effort they require can be challenging in today’s fast-paced world.

Our journey involved benchmarking these dishes to the traditional methods used by homemakers, capturing the essence of how an amma would prepare them at home. This set the standard for the flavor profiles we aimed to achieve. The challenge was to replicate the authentic taste and texture while ensuring our products were preservative-free.

Our R&D team worked tirelessly, conducting extensive trials to balance authenticity and convenience. Through our innovation center we crafted recipes that retain the goodness of traditional Kerala breakfasts while being ready in just five minutes. With this range, Eastern redefines breakfast convenience, allowing families to savor the true flavors of Kerala in a fraction of time.

With over one million Keralites in the UAE, how does Eastern plan to cater to both the traditional tastes of this community and the broader multicultural audience?

With almost two million Keralites in the UAE, Eastern understands the deep emotional and cultural connection this community has with its traditional cuisine. The Eastern 5-Minute Breakfast range is designed to preserve the authentic flavours of Kerala while offering a convenient solution for modern lifestyles. By using high-quality ingredients and a preservative-free formula, the range ensures that the taste and texture remain true to tradition, making it an ideal choice for Malayalees longing for home-cooked meals.

While there are other instant and ready-to-eat options in the market, Eastern’s range stands out by offering dishes like Puttu and Palappam, which traditionally require culinary expertise and time-consuming preparation. These dishes are not widely available in the quick- convenience food category.

At the same time, Eastern is expanding its reach to a broader multicultural audience by showcasing South Indian cuisine as a flavourful, nutritious, and easy-to-prepare option for all. The simplicity of the 3 Easy Steps preparation makes these dishes accessible to non-South Indian consumers who are eager to explore new flavours. Through strategic retail partnerships, digital outreach and and aggressive in-store sampling, Eastern aims to introduce and establish South Indian breakfast as a preferred choice for consumers in this region.

What’s one thing about Orkla IMEA that people might not know but should?

While Orkla IMEA was incorporated recently, we have been in the region for over 25 years now, through our brand Eastern.

Features

2025 Hospitality Tech Trends

Published

5 months ago

February 12, 2025

Integrator Web-Editor

By Prince Thampi, Founder and CEO, Hudini

As we approach 2025, the hospitality industry is poised for transformational growth, driven by evolving traveller preferences and advancements in technology. The future of hospitality promises enhanced convenience, personalisation and sustainability, with a significant focus on creating memorable experiences for guests. Let’s dive into five key trends that will shape the hospitality tech landscape in 2025 and beyond.

The Continued Rise of Frictionless Technology

The increased demand for frictionless experiences is set to dominate the industry, with more and more travellers preferring hotels that offer touch-free check-in, check-out, and room access via mobile apps. This trend reflects a broader shift towards easy interactions powered by seamless digital integration. Mobile apps have been an essential tool for a few years now, enabling guests to manage their stays, order room service, and access hotel information effortlessly. With the introduction of Gen AI, those apps have become more powerful than ever and are now able to provide highly personalised recommendations and speak in different languages.

Hotels embracing this trend will gain a competitive edge, as tech-savvy travellers prioritise convenience and efficiency during their stay. According to a recent survey by Deloitte, around 72% of travellers are more likely to choose a hotel that offers mobile check-in and check-out services over those that don’t.

Hyper Personalised Guest Experiences

In 2025, personalisation will continue to be at the core of hospitality services but will finally be taken to the next level thanks to Gen AI. Guests expect hotels to anticipate their needs and offer tailored experiences, from customised room settings to personalised dining recommendations. Apps powered by AI are now able to predict guest needs based on a wealth of data, ingested from the hotel systems or fed externally.

Leveraging guest data and insights, hotels can create unique offerings that cater to individual preferences. This level of personalisation not only enhances guest satisfaction but also fosters loyalty and repeat bookings. According to Oracle’s findings, biometrics and AI are set to play pivotal roles, with 62% of guests valuing automated recognition for personalised interactions. Biometrics will experience a breakthrough into mainstream hospitality in 2025. Facial recognition technology has matured significantly and is ready to be weaved into the guest experience. It will enable better security and guest recognition while protecting their privacy at the same time.

AI-Enabled Customer Service

Artificial intelligence is revolutionising every aspect of the hospitality industry, but will be by itself a new way of providing customer service. Chatbots and virtual assistants are becoming standard tools for handling common queries, offering instant support, and streamlining operations at any time and in any language.

AI-driven solutions not only enhance efficiency but also provide guests with 24/7 assistance, ensuring a smoother and more satisfying experience. By integrating AI technologies, hotels can free up staff to focus on delivering exceptional in-person service.

Sustainability and Eco-Friendly Practices

Sustainability is no longer optional, it’s a necessity often enforced by regulation. Travellers are increasingly favouring hotels that adopt eco-friendly practices, such as using locally sourced food, implementing energy-efficient operations, and reducing waste.

By prioritising sustainability, hotels not only meet guest expectations but also contribute positively to the environment. This commitment to green initiatives enhances brand reputation and attracts environmentally conscious travellers. A recent survey by Booking.com found that 83% of global respondents believe more sustainable travel is vital, with 49% believing there aren’t enough sustainable travel options and 53% saying they get annoyed when a hotel prevents them from being sustainable.

Smart use of technology is key in the sustainability journey of hotels. Technology can accurately measure the reduction in carbon footprint, it will help reduce energy and adopt renewable energy sources, and will enable the effective management of food waste. Many hospitality apps allow guests to apply green energy settings to a room, some will even exchange your energy savings to loyalty points.

The return of ‘real’

With Gen Z – the first generation grown up with everything digital – becoming the next large group to travel, the craving for ‘real’ experiences is bigger than it ever was. Hotels focusing on truly unique and hyper local experiences; a great meal, cultural outing, or wellness treatment will win the hearts of this generation.

Fortunately hotel apps, AI, automation of processes, sustainability tech and the removal of cumbersome processes like checking-in and studying paper manuals will free up hotel staff to allow them to do what they do best: providing unforgettable, personalised and sustainable experiences.