Hotel management contracts and deficiencies in owner-operator capital expenditure goal congruency
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A review of the findings of prior empirical research concerning hotel management contracts between owners and operators is undertaken. It is noted that management contracts have become increasingly commonplace in the international hotel sector and that gross revenue and gross operating profit are the most extensively used determinants of operator incentive fee remuneration. These findings present a platform for examining how revenue and gross operating profit are deficient in promoting owner-operator goal congruency. In light of this, return on investment (ROI) and residual income (RI) are examined as potential alternative determinants of operator reimbursement. While it is appears that both ROI and RI as determinants of hotel operator fees would represent an advance in promoting owner-operator goal congruency, a rationale outlining how residual income is preferable to ROI is outlined.
Journal of Hospitality & Tourism Research
Copyright 2010 International Council on Hotel, Restaurant, and Institutional Education. This is the author-manuscript version of the paper. Reproduced in accordance with the copyright policy of the publisher. Please refer to the journal's website for access to the definitive, published version.
Commerce, Management, Tourism and Services not elsewhere classified