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The Relevance of Management Contract in the Hospitality Industry for the project finance

Author

Listed:
  • Ramon Sotelo
  • Kai Fisher

Abstract

This paper analyses the relevance of management contracts for the finance of hotel projects and delivers a scheme for decision making for the question. Using modern approaches to finance different forms of contracts between the landlord and the hotel-management can be seen as a continuation between debt finance ñ the case of pure lease contract ñ and equity finance ñ the case of a pure management contract. Hybrid forms of contract can therefore be seen a mezzanine form of finance. It is shown, the optimal lease or management contract depends on the liquidity of the location and the standard and type of services delivered to the guest, being usually the category of the hotel the proxy for the ladder. Due to the risk situation of the management contracts they have a direct impact on the project finance of the hotel-project.

Suggested Citation

  • Ramon Sotelo & Kai Fisher, 2011. "The Relevance of Management Contract in the Hospitality Industry for the project finance," ERES eres2011_57, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2011_57
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    File URL: https://eres.architexturez.net/doc/oai-eres-id-eres2011-57
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    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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