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What Does SNDAs or Subordination Mean in Hotel Management Agreements | Hotel Marketing - YouTube
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hey guys Ollie here with Bezla.com LLC and today聽
i'll be talking about hotel management agreements聽聽
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or hmas for short these agreements can go聽
by a few different names so you may have聽聽
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heard them referred to as hotel operating聽
agreements or a hotel management contract聽聽
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as well regardless of the name its primary聽
purpose is to document the responsibility聽聽
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and therefore the risk between you as the聽
hotel owner and your hotel manager or operator聽聽
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the contents of your agreement is generally up to聽
you but must be agreed and signed by your operator聽聽
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your management agreement is there to settle any聽
disputes you may have with your operator if and聽聽
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when they arise you may feel at times that聽
your hotel operator is overstepping the mark聽聽
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for example not including you in some key聽
decisions your management agreement is the聽聽
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written documentation that you can then use聽
to challenge them on any issues like this聽聽
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and to avoid debates and disagreements happening聽
in the future crucially having a good hotel聽聽
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management agreement is the first step in hiring聽
an operator for your hotel but you have to make聽聽
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sure that that operator is right for you and your聽
property so to help you with this all-important聽聽
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process check out my recent video on our blog at聽
www.bezla.com forward slash blog to hear my top聽聽
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five tips behind finding the rights operator聽
for your hotel within a management agreement聽聽
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is something called a subordination provision聽
if your property is secured by a loan this part聽聽
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of the agreement documents the relationship聽
between the owner the operator and the lender聽聽
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this allows the lender to retain some control聽
of the management until the loan is repaid聽聽
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and the inclusion of a subordination agreement聽
is usually a condition of providing a hotel loan聽聽
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the subordination agreement may contain聽
a non-disturbance clause which recognizes聽聽
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the manager's right to control the day-to-day聽
operations without interference from the lender聽聽
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there may also be an attorney clause which where聽
in return the manager formally agrees to recognize聽聽
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the lender as the owner if they require the聽
hotel for example through refinancing therefore聽聽
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these provisions can sometimes be known as an聽
snda or subordination non-disturbance attorney聽聽
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but subordination agreement works just fine聽
too the other key thing that you need to be聽聽
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aware of is that different stakeholders will want聽
different things from the management agreement so聽聽
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you need to be aware of these to avoid bias and聽
to ensure the agreement is as fair as possible聽聽
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operators are driven by the idea of a聽
long-term management contract as this聽聽
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will provide a secure revenue stream for the聽
operator regardless of the hotel's profitability聽聽
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they're also likely to want control over聽
any future sale of the property between one聽聽
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owner and another to ensure that they聽
remain at the operator under the new聽聽
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ownership lenders are driven by the owner's聽
ability to pay off debts in line with the agreed聽聽
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loan timeline their standards may change depending聽
on the state of the economy but their motivation聽聽
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to receive regular repayments for the duration聽
of the loan will always be their core motivation聽聽
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they want the operator to stay in place to聽
ensure consistency between any change in owners聽聽
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and finally hotel owners want flexible financing聽
where lenders are satisfied with the way to the聽聽
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way the hotel is being managed and operated owners聽
argue arguably have the the most simple goals聽聽
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they want everything to run smoothly because聽
they're driven by the overall success of the聽聽
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business in the long term and the short term聽
rather than these more specific motivations聽聽
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so that's a bit about drawing up hotel management聽
agreements or hmas remember there's no simple聽聽
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answer to the issues being faced so for example聽
with conflicting interests between different聽聽
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stakeholders because each hotel is unique聽
but knowing these motives of each party can聽聽
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definitely help you to reach an agreement if we聽
can be of any assistance with your hotel marketing聽聽
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please do reach out to us on our website at聽
www.bezla.com or you can give us a call on 888
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999-8086 thank you so much for watching
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you
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