Performance tests allow an owner to terminate the administrative agreement if the operator does not meet the performance criteria agreed after a construction period (test periods start on average in the fourth year). As a general rule, two types of performance tests are used, often in common: in order to keep the asset in a marketable state and periodically replace a hotel`s furniture, furniture and equipment (FF-E), a «downward» fund is created to raise capital for this periodic replacement of FF-E, which is generally a percentage of gross turnover and depends to some extent on the positioning/level of the hotel. This category includes all non-real estate items that are generally capitalized and not spun, i.e. they are not included in the operating statement, but still affect an owner`s cash flow. In general, management agreements include a reserve for the replacement of FF-E between 3 and 5% of gross turnover per month, the lowest percentage being more related to budget hotels and the higher percentage of luxury hotels and luxury hotels. This percentage often increases in the first years of the hotel`s operation until it reaches a stabilized amount, usually up to the fifth year, but sometimes only in the tenth year, as shown in the table below. 11. Employees: In the United States, the management company generally employs all hotel employees, with the unintended consequence that the owner receives a list of each employee`s salary and benefits for privacy reasons. Outside the United States, the owner acts as an employer, but the management company will assign key positions such as the Executive Committee to some experienced employees. These key agents usually leave the property when the HMA is completed or expires.
In many legal systems, hotel employees are considered to be employed jointly by the management company and the owner to assess the employer`s liability for workers` behaviour. Joe regularly represents real estate developers, property owners, managers and investors in the areas of acquisition, development, leasing, structured financing and commercial real estate management, including hotels,… Licensing fees determine the extent to which the owner`s agreement is required to make decisions affecting the operation of the hotel.