Third of three on management agreements. The first is where the short-let fee came from, the second is a cost shock and who pays for it. This one is the contract itself.
An owner sends me a management agreement and asks whether the fee is market. It usually is. That is not where the money goes.
Here is the order I read them in.
What the incentive fee is measured on
A base fee on revenue and an incentive on revenue are the same fee twice. If the operator earns more by selling more, at any cost, you have bought growth and not profit. An incentive tied to GOP puts you on the same side of the table, because the operator now feels the cost line as well as the top line.
Then check what sits above and below GOP in their definition. Every operator has a version. Some of them park costs where the incentive cannot see them.
Term, and how you get out
Length matters less than the exits. What performance test triggers a right to terminate, measured against what benchmark, over how many years? A test against budget is not a test, because the operator writes the budget. A test against a named comp set, agreed annually, is.
Look for the notice period and what it costs. A twenty-year term you can exit in year four on a performance test is safer than a ten-year term you cannot exit at all.
Who pays for what
Capex, FF&E reserve, group services, marketing contribution, the operator's own systems. These are the lines that quietly move a good deal to a bad one. Ask which charges are cost, which carry a margin, and get that in writing rather than in a call.
The people clause
You are buying an operator, but you are usually buying a general manager. If the agreement does not name a key person or give you a say when they change, you have bought a logo.
What you get to see
Reporting frequency, the format, and whether you have audit rights that are real. If you cannot open the ledger, every conversation about performance becomes a conversation about trust.
None of this is exotic. It is just further down the document than the fee, so it gets read last, at the point where everyone wants to sign. I would rather spend a week on the exits than a year on the fee.