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Hotel Management Agreements

Using a Letter of Intent (“LOI”) Instead of a Bullet-Point Term Sheet – Be Sure to be Clear About the Legal Effects of an LOI

Is an LOI legally binding? The general rule: look to the language of the LOI to determine if the parties intend to be bound to all or some portions of the LOI. Most litigation regarding the enforceability of LOIs arises because the parties did not clearly reflect their intention concerning enforceability. This is particularly so if the LOI contains the material provisions of a contemplated transaction and there is no unequivocal expression of the intent of the parties to the contrary. Yet in the hotel management agreement context, the LOI is useful and worth the effort, time and risk precisely because it is a way to conclude the negotiation of the material terms of the agreement prior to launching into the tedious and often protracted negotiation – mainly between lawyers – of the text of the definitive agreements. In the international context, the “management agreement” can consist of five or more separate agreements. It is almost always more efficient to ascertain if there is a meeting of the minds on the material (“key”) business terms first.

Notwithstanding a finding that a LOI does not constitute a contract, courts may impose a “good faith duty of negotiation”. These states are California, New York, Illinois, Maryland and Massachusetts. In other jurisdictions, no such right is recognized and is expressly excluded. They are Tennessee, Kentucky, Texas and Washington.

New York case law has also given us “Type I” (binding) and “Type II” (non-binding) LOIs. The United States Court of Appeals for the Second Circuit in a treatise-like opinion, explored the development of these two types of LOIs applying New York law in the case of Vacold LLC v. Cerami (545 F.3d 114 (2008))

For more on the subject of enforceability, please refer to:

“Term Sheets and Letters of Intent – The Contractual Ether World” presented by Alston & Bird LLP (333 South Hope Street, Los Angeles, CA 90071) at the Association of American Corporate Counsel meeting on October 15, 2008.

Express Disclaimers

To make it more likely that a court will not construe the LOI as binding (except in respect of those few provisions that the parties intend to make binding), consider explicit disclaimers that include:

This document is non-binding in every respect and is for discussion purposes only
The parties will not be bound in any respect until and unless a written agreement is signed and executed
There is no binding agreement yet relating to the subject matter, written or oral
The parties understand that the negotiation may not result in any enforceable contract
This document does not constitute an “agreement to agree”
In addition, do not use contractual language, particularly the verb “shall” when expressions such as “may”, “intend to” and “would” can be used instead

Binding Provisions

  • Confidentiality
  • Exclusivity (e.g., Manager will not negotiate with another hotel developer or owner until the earlier of [DATE] or this LOI is canceled by agreement of the parties
  • Representations (e.g., Ownership of the land or validity of the option to acquire…)
  • Due diligence deliverables
  • Governing law
  • Preparation and delivery of the definitive agreements – timing
  • Submission of the deal terms for Board approval (Not a good idea to wait until the definitive agreements are executed)
  • Waiver of any claims for non-approval by a party’s board
  • Waiver of the good faith duty to negotiate

Settle the Key Terms

These are terms that generally are the basis for negotiation of the typical Management Agreement and the time to identify and settle them is now. If addressed later, these issues, or any one of them, have the potential to be “show stoppers”. Generally confronting key issues in the midst of negotiating the definitive agreements can be expensive or can impose pressure upon a party to “cave” on the point “at this late stage and after all the expenses we have incurred”. Consequently, it is at this stage that the parties must identify for themselves the terms they insist upon. How the terms are phrased will dictate later how they are rendered in the definitive agreements. The alternative of having a term sheet with a few bullet points – “kicking the can down the road” – usually is not a good strategy.

What are the Key Terms for a Typical Hotel Management Agreement?

Identification of the Parties (Can be an issue on the Developer’s side)

  • Is the Developer entity the ultimate owner or will the Developer be a partner, member or shareholder in the entity into which equity investments will be made and that will own the project?

Description of the “Hotel” or the “Project”

  • Is the key count a critical element for the management company?
  • Is the parking garage included in the “Hotel” and therefore it will be managed by the manager and its revenue stream will be included in the Hotel’s “Gross Revenue”?
  • Is commercial space to be managed as part of the Hotel or leased to an operator? (Affects how its revenue is treated)

Residences

  • Will they be branded, marketed and managed by the Manager?
  • Will there be a Rental Program?
  • What Hotel amenities will be available to residence owners?
  • What are the branding and management fees?
  • Was is the split of rental proceeds with residence owners?

Where residences are involved that are branded and managed by Manager when they are included in the “Hotel” pursuant to a Rental Program, a branding fee will be paid to Manager. In addition, the Manager will benefit from the inclusion of the rental revenue from the residences in the Hotel’s Gross Revenue and typically insists that 100% of the rental revenue be so included and then the unit owner’s share of the rent (say 30-40%) is paid. Hotel Gross revenue is further enhanced by the provision of Hotel amenities, such as room service and maid service, to the residences even when they are occupied by the unit owner. These arrangements will vary depending upon the physical configuration and the perceived uplift in value attributable to the brand. The key terms should be included in the LOI.

The Developer’s /Owner’s Financing Terms

  • Limitations on Loan-to-Value
  • Requirement for the Developer to obtain a Subordination and Non-Disturbance Agreement (“SNDA”) for the benefit of the Manager

Term

  • Typical: 30 years renewable at Manager’s election
  • Negotiated:
    • Early no-fault termination by Owner with a payment of Liquidated Damages; expect a long “black-out” period
    • Manager’s renewal option subject to Manager’s not having failed the Performance Test
    • Termination Upon Sale – tough to obtain
    • SNDA may provide the lender with termination rights upon or some time after foreclosure or acceptance of a deed in lieu of foreclosure

Performance Test

  • Typical: the two-prong test – e.g., Manager does not achieve 85% of RevPAR of the Competitive Set AND fails to meet 90% of Budgeted Gross Revenue (or GOP or NOI) for two consecutive years after the ramp-up period and failure is not due to Force Majeure Rooms Out of Service
    • Manager will demand cure rights and will have to cure only one of the two failed prongs (not the RevPAR prong of the test) and for only one of the failed years, and the clock is thereby reset
  • Negotiated: Owner will counter with higher percentages and a failure in any two of three consecutive years; Owner may also ask that “AND” be changed to “OR” – not likely to be allowed
    • A More Meaningful Test: Owner Must Obtain a Targeted ROI – not likely to be agreed by Manager because several key expense items are beyond the Manager’s control, such as property taxes and debt service

Fees

  • Revenue Based Fees:
    • “Base Fee” – Typical: 3% of Gross Revenue
    • “Marketing Fee” – Typical – 1% of Gross Revenue
    • Negotiable? Maybe a ramp up in early years of a new hotel
    • For an existing hotel, Owner may seek a fee that is a higher percentage, but only of Gross Revenue in excess of previously achieved levels; this will be resisted by the big brands
  • Earnings Based (Incentive) Fees: Rewards not just volume (Gross Revenue) but operating efficency
    • Typical: 10% of Gross Operating Profit – i.e., Gross Revenue MINUS Operating expenses – i.e., just those expenses that are within the control of the Manager and therefore include routine departmental expenses, but do not include:
    • FF&E Reserve (negotiable)
    • Capital Expenditures
    • Property Insurance
    • Property Taxes
    • Debt Service
    • Distributions/Dividends
    • Owner’s Income Taxes
  • Some Variations on Incentive Fee Formulae:
    • Earned as a percentage of Gross Operating Profit but only paid to the extent of Net Operating Income in Excess of Owner’s Priority which is typically a percentage of project cost increased by subsequent capital expenditures; earned but not paid fees accumulate and may or may not bear interest and are paid to the extent of excess NOI after current Incentive Fees are paid
    • Or a higher percentage – say 25% – of Net Operating Income (all expenses before depreciation and income taxes)
    • Or for an existing hotel, a higher percentage but only of Gross Operating Profit in excess of a previously achieved level

There are many variations that are the ‘stuff’ of hard negotiation

Other Charges/Fee

  • Central Service Charges – e.g., reservation charges (typically $X per reservation), reward programs (typically a percentage of Room Revenue generated by the reward-program member who is a guest at the hotel), employee training charges, brand marketing charges and more – be sure to limit these to the extent possible to cost recovery and make them apply in the same manner as they apply to all other hotels in the chain
  • Voluntary (Optional) Programs – such as optional purchasing programs, technical services for improvements, employee training seminars, quality audits and more

Restricted Area / Radius Restriction

  • Owner will seek to restrict Manager from operating or franchising the brand and its other brands in the same or similar market niches within a defined territory surrounding the hotel; generally blocks for urban centers, entire countries for remote areas
  • Manager will resist and will seek to limit the brands to the same brand only and if the brand restriction applies to other brands owned by Manager, Manager will seek an exception for “chain acquisitions” of other brands and may also seek to exclude variations on the use of the restricted brand, such as “Brand XXX Residences”; Manager may also seek to have the restricted area shrink or disappear after a number of years

Credit Enhancements

  • Assistance from the Manager to fund the project to build or acquire the hotel
    Some examples:

    • Equity Participation
    • Subordinated/Mezzanine Loan
    • Key Money
    • Fee Subordination (e.g., Incentive Fee with an Owner’s Priority)
    • Debt Service Guaranty
    • Contribution of Technical (and Other) Services

Budget Approval by Manager

  • Budget more than operating expenses; an employment plan, a marketing plan, a CAPEX plan…
  • Owner wants more than a right to review the budget that the Manager prepares; Owner wants approval right; the budget process is the Owner’s most significant remaining operational involvement once the Hotel has been turned over to the Manager’s day-to-day control
  • Some items may be excluded as outside Manager’s control, such as utility costs
  • Items in dispute can be set at the prior fiscal year’s level plus a CPI-based increase pending resolution by an “Expert”

Employees: Who is the Employer?

  • In the US, Manager typically will employ all hotel employees. This can have the (unintended) consequence of preventing the Owner from obtaining a roster of each employee’s salary and benefits
  • Outside the US, Owner will be the employer, but Manager will assign (second) certain of its personnel to serve in key positions…possibly the entire Executive Committee. If Manager is terminated, these employees will usually exit the property when the Management Agreement is terminated (or expires)

Hiring and Firing Key Personnel

  • Owner typically requests and obtains the right to interview candidates and approve the hiring of “key personnel” e.g., General Manager, Controller, Director of Marketing and Sales
  • Owner not likely to have the right to fire any personnel (each employee should serve one master) but should have the right to have Owner’s views taken into account when reviewing the performance of key personnel or at least Owner’s complaints should be given good faith consideration

Insurance Types (except property) and Levels Will generally be specified by Manager and both Manager and Owner will be named insureds. This eliminates a right of subrogation.

Conclusion

Dealing with these key provisions at the LOI stage is essential to knowing whether or not you have a deal. It is better to know this prior to all the sturm and drang among the lawyers over the definitive agreements. No point in kicking the can down the road only to find out that in addition to the loss of time and incurring of legal fees from the negotiation of the definitive agreements, there is no deal.

With permission of HospitalityLawyer.com


About the Author:

Albert Pucciarelli is a former member of Cayuga Hospitality Consultants.

Uniform System Of Accounts For The Lodging Industry Provides Essential Guidance For Hoteliers

The American Hotel & Lodging Educational Institute (EI) interviews Ralph Miller, CPA, CA, CBV, CHA, CHAE, vice chairman of the Financial Management Committee of the American Hotel & Lodging Association, about the Eleventh Revised Edition of the Uniform System of Accounts for the Lodging Industry, available this month from the Educational Institute.

How is the Eleventh Revised Edition different from the Tenth Revised Edition, and why is this so important to the industry?

The primary purpose of the Uniform System of Accounts for the Lodging Industry is to provide operating statements that are formatted to provide hotel owners, managers, and other interested parties with information and data that is pertinent to the unique operating environment of the lodging industry.  The Eleventh Revised Edition of the Uniform System of Accounts for the Lodging Industry was revised to reflect changes in industry practice and to address contemporary industry practices, including but not limited to:

  • Technology updates;
  • Sustainability;
  • Globalization;
  • New Terminology;
  • Cluster Services;
  • Distribution Channels; and
  • Enhanced Ratio Analysis.

The Uniform System of Accounts is referenced in many industry contracts, management agreements, and debt agreements and other documents, the format and terminology of the Eleventh Revise Edition must be followed in order for an operating statement to be presented “in conformity with the Uniform System of Accounts for the Lodging Industry.”  The effective date for adopting the Eleventh Revised Edition is for fiscal years beginning January 1, 2015.

The following list highlights the material changes from the Tenth Revised Edition that are incorporated in the Eleventh Revised Edition.

Summary Operating Statement

The following statements highlight the material changes made to the presentation of the Summary Operating Statement.

  • “Rentals and Other Income” has been changed to “Miscellaneous Income.”
  • “Revenue” has been changed to “Operating Revenue” and “Total Revenue” has been changed to”Total Operating Revenue.”
  • “Information and Telecommunications Systems” has been added as a fifth Undistributed Operating Department (see Part I, Schedule 6).
  • “Fixed Charges” has been changed to “Non-Operating Income and Expenses” (see Part I, Schedule 11).
  • “Net Operating Income” has been changed to “Earnings Before Interest, Taxes, Depreciation and Amortization,” commonly called EBITDA.
  • Two Summary Operating Statement formats have been developed:
  • For operators, a Replacement Reserve is deducted from EBITDA, and the bottom line is “EBITDA less Replacement Reserve.”
  • For owners, Interest, Depreciation, Amortization, and Income Taxes are deducted from EBITDA, and the bottom line is “Net Income.”

Operating Departments

The following statements highlight the material changes contained in the operating schedules.

Multiple Departments

  • In all departments, readers are advised to refer to Part V of the book that provides enhanced guidance on the reporting of revenues and expenses on a gross versus net basis.
  • Additional guidance is provided in each revenue-producing department regarding the handling of surcharges, service charges, and gratuities.
  • Categories have been added to each department schedule to provide additional information regarding Labor Costs and Related Expenses:
  • The aggregated salaries and wages of management and non-management personnel are presented on the department schedule.
  • Service Charge Distribution is presented as a distinct cost category within Salaries, Wages, Service Charges, Contracted Labor and Bonuses. It has been moved from Payroll-Related Expenses-Supplemental Pay.
  • Contracted, leased, and outsourced labor costs are presented independently.
  • New expense categories have been added to account for cluster services and department-specific reservations expenses.
  • Administrative telecommunications expenses are no longer recorded within each department. All administrative telecommunications expenses are now recorded in the new Information and Telecommunications Systems-Schedule 6.

Rooms Department

  • The segmentation that is used to record rooms revenue reflects efforts to provide greater detail and definitions and to align with industry practices.
  • Resort fees are now recorded in Miscellaneous Income-Schedule 4. They are not included in the calculation of average daily rate.
  • Enhanced guidance is provided regarding the handling of revenues and expenses associated with mixed-ownership lodging facilities.
  • Enhanced guidance is provided regarding the allocation of package revenues and the handling of package breakage, which has moved to Miscellaneous Income–Schedule 4.

Food and Beverage Department

  • Food and Beverage-Schedule 2 presents the revenues from both food and beverage venues. Separate food and beverage department schedules are not mandatory.
  • Enhanced guidance is provided regarding the handling of gift certificate revenue.
  • The term “cover” has been replaced with the term “customer” to reflect the number of people served.

Other Operated Departments

  • Telecommunications is no longer an Other Operated Department. Guestroom-generated revenues and cost of sales are now accounted for in Guest Communications on Minor Operated Departments-Schedule 3-xx. Function room-generated revenues and cost of sales are accounted for in Audiovisual on Food and Beverage-Schedule 2. All telecommunications-related labor expenses, administrative telecommunications costs, and the costs associated with complimentary phone and Internet services are recorded on the new Information and Telecommunications Systems-Schedule 6.

Miscellaneous Income

  • All resort fees and package breakage are recorded in Miscellaneous Income-Schedule 4.
  • Additional guidance is provided regarding the handling of commissions, business interruption insurance, foreign currency exchange, unused or forfeited gift certificates, and interest income.

Undistributed Departments

  • The information and telecommunications systems department has been created to consolidate all system-related technology expenses.
  • Additional guidance is provided regarding the handling of non-guest-related foreign currency exchange income and expenses.
  • The segregation of sales and marketing expenses was eliminated.
  • Revenue management and catering sales functions have been clarified as sales and marketing expenses.
  • Utility Taxes was eliminated as a separate expense category on Utilities-Schedule 9.
  • Contract Services was added as an expense category on Utilities-Schedule 9 to incorporate the cost of energy audits.

Non-Operating Income and Expenses

  • The net revenue generated by ownership that is not managed or maintained by the hotel is recorded as Non-Operating Income.
  • An Owner Expenses category has been added to account for such items as asset management fees, receiver fees, and owner directed market studies and audits.
  • Additional guidance is provided regarding the handling of equipment rental, unique municipal charges, and various employee housing expenses.

Financial Statements

The following statements highlight the material changes contained in the financial statements.

  • Revenue and expense categories have been added to the Income Statement to reflect changes made to the Summary Operating Statement.
  • A Statement of Comprehensive Income has been added to supplement the Income Statement. An illustrative statement is provided.
  • A reference to International Financial Reporting Standards (IFRS) was added.
  • Gift certificates and cards have been removed from Other Current Liabilities and made a separate line item.
  • Additional guidance is provided regarding the handling of inventories, operating equipment, and pre-opening expenses.

Financial Ratios and Operating Metrics

The following statements highlight the material changes contained in Part III.

  • In recognition of the importance of operational and financial analysis, the name of this section has been changed from “Ratios and Statistics” to “Financial Ratios and Operating Metrics.”
  • Ratios are presented for both operating departments and undistributed departments.
  • For each department, a recommended schedule of key ratios is provided.
  • A recommended labor cost schedule is provided that presents detailed labor cost data for each department.
  • Additional utility and waste consumption ratios are provided, as is a discussion regarding the growing trend to measure sustainability and environmental impact.

Revenue and Expense Guide

The following statements highlight the material changes contained in the Revenue and Expense Guide.

  • Guidance is provided regarding the proper recording of both revenues and expenses.
  • The Revenue and Expense Guide available in an electronic format that is both sortable and searchable.

About the American Hotel & Lodging Educational Institute

Established in 1953 as a nonprofit educational foundation of the American Hotel & Lodging Association, the Educational Institute’s mission is to continue being the preferred provider to the lodging industry, hospitality schools, and related hospitality industries by developing and providing quality resources to train, educate, and certify hospitality professionals worldwide.

This article is reprinted from the May 2014 issue of the American Hotel & Lodging Educational Institute eNews.


About the Author:

Ralph Miller is a former member of Cayuga Hospitality Consultants.

Maintaining Hotel Maintenance Contracts

One of the most important and high impact responsibilities of a hotel’s engineering team is the administration of maintenance contracts and service agreements. Successful management of this critical function can streamline engineering operations, reduce operating expenses, and minimize downtime. However, when executed poorly, maintenance contracts can act as the proverbial tail wagging the dog, shortening equipment life cycles, raising expenses and increasing the risk of loss and exposure to liability. As such, choosing the right service professionals, creating appropriate contract documents, and pragmatically executing their scope of work, are some of the most vital responsibilities of the engineering team.

The potential benefits of maintenance contracts are numerous, and should be carefully considered when deciding whether to enlist the assistance of outside service professionals. Outsiders often bring specific and applicable expertise and are able to reduce staffing needs, and there are many other advantages including risk mitigation, access to specialized labor and parts inventories, and preferred labor rates. Yet despite these benefits, many hoteliers are often hampered by service agreements that fail to meet the needs of their properties. Contracts with obsolete provisions and terms, and automatic price escalations, can hinder the hotel engineer’s ability to meet the quality and financial goals of the property. Below are seven tips to help ensure that the property’s contract maintenance experience is an effective one.

1. Avoid, or at least seriously scrutinize, vendor-supplied contract documents

Service agreements written and provided by contractors are often extremely vendor-centric, and tend to include provisions that put an inordinate amount of responsibility or risk on the customer. These boiler plate contracts are designed to benefit the contractor, often at the expense of an equitable agreement. Instead, opt for standardized agreements offered by the hotel company’s legal department, or consider other standardized agreements that create a level playing field for both parties. A quick internet search for “standardized maintenance contracts” can provide a great starting point, and can offer plug-n-play style contract creation. While these are no substitute for the advice of competent legal counsel, use of such documents can help to prevent committing a property to unfair and often detrimental contract terms.

2. Consider agreements for the long term

Contract terms vary greatly, from months to several years, and there are many good reasons for this variance. Longer term agreements can generate financial security for both parties, in the form of predictable expenses for the customer and predicable revenue streams for the contractor. A longer contract term can have value to both parties and may positively influence contract terms or reduce costs. In addition, a longer term may make it more palatable for a vendor to invest in equipment or training that positively affects the hotel, by knowing that the cost of such an investment can be amortized by them over a longer period of time.

3. Beware of automatic renewal; and “boilerplate” renewal terms

Avoid automatic renewal clauses that keep parties bound to an agreement simply by doing nothing, or agreements that are designed to automatically renew unless prior notification to cancel is provided many months before a contract expires. At a minimum, include a provision that requires written notification of intent to exercise a renewal option. By doing so, it affords both parties a chance to review an agreement for its appropriateness and will prevent a contract’s inadvertent renewal.

4. Don’t forget the “meat and potatoes”

Legalese and elaborate clauses aside, the purpose of a service agreement is to bind a vendor to provide specific, timely and appropriate maintenance services. Yet oftentimes even contracts that have undergone diligent legal review falter when it comes to their non-legal content. Such contracts typically include Scopes of Work that poorly define the contractor’s responsibilities. Moreover, the absence of well-defined scopes of work clauses creates an opportunity for unintended contract interpretation, and can result in an inordinate amount of “billable services” that were expected to be included in the agreement. To prevent this, be sure to have the Chief Engineer or other qualified personnel review a contract’s scope of work to ensure its completeness and applicability.

Also, where necessary and/or appropriate, use a third party consultant to provide this review, especially for high risk or highly technical disciplines such as vertical transportation, water treatment, or life safety systems. Lastly, utilize manufacturers’ recommended maintenance standards when defining a scope of work. By doing so, not only will there be an appropriate scope definition to aid in maximizing the reliability and longevity of hotel equipment, but it will also provide a system for ensuring manufacturers’ requirements are met to maintain their specific warranties.

5. An educated consumer is often the best customer

Frequently, service professionals are relied upon exclusively to maintain a given system, a piece of equipment, or building component. While this is often appropriate, or even mandated, there are many instances where the limited use of building personnel to supplant contract maintenance can be extremely beneficial, even cost effective, in the ongoing execution of a service agreement.

One example is the hotel building automation system, often referred to as an energy management system. Frequently, the in-house staff lacks the training and skills to troubleshoot even the most basic building automation problems. Instead, a log of deficiencies is commonly kept to be shown to and addressed by a service technician, necessitating that the property will endure the problem until their next routine maintenance visit. This means that the technician’s contractual maintenance time is spent fixing rudimentary problems which are better addressed by in-house personnel, while long term system improvements that require the technician’s care are deferred.

To combat this problem, include contract provisions that require contractors to provide training to in house personnel, training that not only makes the service provider’s visits more efficient and effective, but also provides an invaluable investment in the development of the hotel staff.

6. Make it easy to do business together…and reap the rewards

After the outside service provider’s sales person and the hotel GM have signed a contract, the hotel engineer and service manager are charged with its execution. But no matter how much time and effort go into the creation of a contract, its success is contingent in large part upon the relationship with the service providers. With this is mind, focus on creating an environment conducive to strong relationships with outside contractors, upon whom you regularly rely, and make it easy for them to service the hotel account. The creation of such good rapport will pay back many times over when the hotel has a guest stuck in an elevator, or the HVAC chiller fails on a hot summer night. Seemingly small considerations, such as granting a contractor access to an employee cafeteria, or allowing them to park at the hotel loading dock, can go a long way in building strong, hospitable relationships with key service providers who might not otherwise be so punctilious in their adherence to the strict requirements of your contract.

7. Certification and competence

In some instances, hotels believe that the contract terms are so technical or complex that they are not qualified to objectively judge the performance of the service provider, or the quality of their services. Beyond a simple reference check, hoteliers are often limited to the use of third party consultants to inspect performance and ensure their compliance with contract specifications or industry standards. However, such consultants can be costly, and only provide a snapshot in time relative to a contractor’s performance over the life of an agreement. Moreover, such an inspection would be inappropriate when trying to gauge a contractor’s service quality during a bid review. Thus, hoteliers should consider utilizing the benefits of third party certification entities, which specialize in maintaining quality standards within a given industry. Many industries have well respected associations or governing bodies that are diligent in self-governing their industry and the quality of their members’ products or services. Check to see if a service provider’s ability to safely and effectively execute industry standards is certified by an appropriate entity.

Examples of such entities include the National Fire Protection Association (NFPA) for fire and life safety standards, the American Society of Heating, Refrigeration and Air Conditioning Engineers (ASHRAE) for mechanical standards, and the National Swimming Pool Foundation (NSPF) for pool operating standards.

Diligent contract administration makes for positive outcomes. So while the meticulous review and execution of service agreements may not be as alluring as a full house or as marketable as the chef’s winning gumbo recipe, engineering managers who implement these tried and true methods can expect as much financial benefit and job satisfaction as their more visible counterparts — and in the process of doing so, they will play an invaluable role in helping their hotels to flourish.


About the Author:

Richard Manzolina is a former member of Cayuga Hospitality Consultants.

Leadership: The Basis For Management

The concept and practice of leadership as it applies to management carries a fascination and attraction for most people. We all like to think we have some leadership qualities and strive to develop them. We look at leaders in all walks of life seeking to identify which qualities, traits and skills they possess so we can emulate them. A fundamental question remains “What is the essence of leadership that results in successful management, as opposed to failed management?” At least part of the answer can be found within the word itself.

  1. Loyalty. Leadership starts with a loyalty quadrant: loyalty to one’s organization and its mission; loyalty to organizational superiors; loyalty to subordinates and loyalty to oneself. Loyalty is multi-directional, running upwards and downwards in the organization. When everyone practices it, “loyalty bonds” occur which drive high morale. Loyalty to oneself is based on maintaining a sound body, mind and spirit so one is always “riding the top of the wave” in service to others.
  2. Excellence. Leaders know that excellence is a value, not an object. They strive for both excellence and success. Excellence is the measurement you make of yourself in assessing what you do and how well you do it. Success is an external perception that others have of you.
  3. Assertiveness. Leaders possess a mental and physical intensity that causes them to seek control, take command, assume the mantle of responsibility and focus on the objective(s). Leaders do not evidence self-doubt as they are comfortable within themselves that what they are doing is right which, in turn, gives them the courage to take action.
  4. Dedication. Leaders are dedicated in mind, body and spirit to their organization and to achievement. They are action-oriented, not passive, and prefer purposeful activity to the status quo. They possess an aura or charisma that sets them apart from others with whom they interact, always working in the best interests of their organization.
  5. Enthusiasm. Leaders are their own best cheerleaders on behalf of their organization and their people. They exude enthusiasm and instill it in others to the point of contagion. Their style may be one of poise, stability, clear vision and articulate speech, but their bristling enthusiasm underscores their every waking moment.
  6. Risk management. Leaders realize that risk taking is part of their management perch. They manage risk rather than letting it manage them, knowing full well there are no guaranteed outcomes, no foregone conclusions, no pre-ordained results when one is dealing with the future. Nonetheless, they measure risk, adapt to it, control it and surmount it.
  7. Strength. Leaders possess an inner fiber of stamina, fortitude and vibrancy that gives them a mental toughness, causing them to withstand interruption, crises and unforeseen circumstances that would slow down or immobilize most people. Leaders become all the more energized in the face of surprises.
  8. Honor. Leaders understand they will leave a legacy, be it good, bad or indifferent. True leaders recognize that all their relationships and actions are based on the highest standards of honor and integrity. They do the right things correctly, shun short-term improper expediency and set the example for others with high-mindedness, professional bearing and unassailable character.
  9. Inspiration. Leaders don’t exist without followers. People will follow leaders who inspire them to reach beyond the normal and ordinary to new levels of accomplishment, new heights of well-being and new platforms for individual, organizational and societal good. Inspiration is what distinguishes a leader from a mere position holder, as the leader can touch the heart, mind and soul of others.
  10. Performance. At the end of the day, leader/managers rise or fall on the most critical of all measurements — their performance. Results come first, but the way in which results are achieved is also crucial to sustaining a leader’s role. Many “dictators” don’t last despite results and many “charismatics” don’t last despite personal charm.

Putting the ten elements together spell LEADERSHIP! Always remember, if you want to develop a leadership quality act as though you already possess it!


About the Author

William P. Fisher is a former member of Cayuga Hospitality Consultants.