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Reasons to Engage a Hotel Operator

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Questions and Answers

What is one of the primary reasons for engaging a hotel operator?

To comply with local zoning regulations and building codes

To gain access to proven training programs and management expertise

To secure financing from banks, which often require professional management (correct)

To meet the minimum staffing requirements for hotel operations

According to the passage, what is one potential benefit of engaging a branded hotel operator?

Guests are willing to pay higher rates for a branded hotel product (correct)

Reduced liability for the hotel owner in case of guest accidents or incidents

Exemption from certain local taxes and fees for branded hotels

Exclusive access to proprietary hotel management software and technology

Which of the following is NOT mentioned in the text as a potential advantage of engaging a branded hotel operator?

Access to menu concepts and marketing strategies

Stringent financial controls and management experience

Availability of employee training and development programs

Opportunity for legal and tax advisory services (correct)

According to the passage, what is a potential drawback of engaging a branded hotel operator?

Higher operating costs due to the fees charged by the operator Signup and view all the answers

What advice does the text provide regarding the decision to engage a branded hotel operator?

Thoroughly investigate the options, as management agreements are long-term commitments Signup and view all the answers

What is the typical range for the length or term of a management contract?

10 to 25 years Signup and view all the answers

Which of the following statements about management fees is correct?

Incentive fees are often calculated as a percentage of adjusted gross operating profit (AGOP). Signup and view all the answers

What is the purpose of adjusting gross operating profit (GOP) to arrive at adjusted gross operating profit (AGOP)?

To calculate the incentive fee for the operator. Signup and view all the answers

Which of the following is NOT typically included in the adjustments made to gross operating profit (GOP) to arrive at adjusted gross operating profit (AGOP)?

Marketing expenses Signup and view all the answers

What impact can unpaid or subordinated management fees have on the value of the investment?

They may become debts chargeable upon the property, reducing the value of the investment. Signup and view all the answers