In the United States, hotel management companies typically employ the hotel staff.   Outside the US, the owners of hotel property commonly employ hotel staff and are liable for all employee claims, while the management company only assigns certain personnel to serve in key positions.

Under the hotel management agreements (HMA), an operator generally has the responsibility of hiring and training the line-staff personnel.  Owner approval is generally required only for the hiring of such senior staff as the general manager, financial controller, and director of sales and marketing, who usually exit the property when the HMA is terminated or expires.

Hotel Operation under a Hotel Management Agreement

Under a hotel management agreement (HMA), a hotel chain or independent management company operates the hotel business on behalf of the client property owner or tenant for a fee. The property owner is generally responsible for the hotel’s assets and the client is usually also the employer of the hotel’s staff.

Source: CMS

Under a hotel management agreement (HMA), a hotel chain or independent management company operates the hotel business on behalf of the client property owner or tenant for a fee. The property owner is generally responsible for the hotel’s assets and the client is usually also the employer of the hotel’s staff.

Where the operator hires certain senior management, the payroll for those staff is charged back to the hotel owner.  Managers also often require owners to maintain insurance to cover liability arising from employee conduct and to bear the costs associated with insuring employee-related liabilities.

An outsourcing clause regulates the appointment of providers of external services to the hotel’s operations, such as housekeeping.  The owner’s consent is rarely required for this unless the contract is above a certain hurdle amount or the term of engagement is longer than 12 months.

In several jurisdictions, hotel staff is deemed to be jointly employed by the management company and the property owner for purposes of assessing liability to the employer for the conduct of employees.  Moreover, in those countries that place social and employee obligations on a lessee or where there are relevant tax issues, hotel management contracts normally state that the agreement is not a venture, partnership agreement or lease.

Sustainable practices and corporate social responsibility of hotels are the subject of growing demand from all stakeholders – guests, hotel personnel, the local community, investors, and society at large.  Sustainable hospitality calls for hotels to respect cultural values, engage in fair-market competitiveness, support local businesses and community, and provide good labor conditions.

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