The HMA preamble also called the “recitals” or “whereas” section, typically provides a brief background and sets the context for the agreement. The HMA preamble usually sets out and defines (i) the agreement date, (ii) parties to the agreement, in particular, the business of the hotel, (iii) the property address and details, (iv) the status of licenses for the operation of the property, (v) the relationship of the parties and (vi) acknowledges the need for legal and regulatory compliance.
HMA Preamble – Table of Contents
Agreement Date
Usually, the date that the parties come together to sign the HMA having completed all negotiations and legal reviews of the contract, after all necessary approvals of the project, and the issue of powers of attorney for signatories.
The agreement date may carry consequences since it may be related to a period by which the operator may unilaterally terminate the HMA if the opening date has not occurred or finance is not in place. The date of the signing may be relevant to the operator, especially if it is near the end of December, since, for strategic and statistical reasons, they may wish to include the signing in the current or subsequent year.
The agreement date is stated clearly and formally to establish when the contract becomes effective. The format may vary slightly, but the goal is to ensure the date is unambiguous. The date is usually mentioned at the very beginning of the contract or within the opening lines of the preamble.
Agreement Date Example Text
“This Hotel Management Agreement (the “Agreement”) is made and entered into as of [day] of [month], [year], by and between [Owner’s Name], a [legal entity], and [Management Company’s Name], a [legal entity].”
Often, the date stated in the preamble is referred to as the “Effective Date”, which represents when the terms and obligations of the agreement officially begin. If the contract is executed but refers to an earlier operational start date (backdating) or a future conditional start date, the language may specify:
Agreement Date Example Text – Backdating & Conditional
Backdating: “This Agreement is made and entered into as of [day] of [month], [year], but shall apply to operations starting from [specific earlier date].”
Conditional dating: “This Agreement is dated [day] of [month], [year], but will take effect on the date that [condition] is fulfilled.”
By explicitly stating the date, the HMA ensures clarity and reduces potential disputes over when the agreement’s obligations commence.
Parties to The Agreement
Identifies both parties by their legal names and roles in the agreement.
Parties to the Agreement Example Text
For example: “This Agreement is made between [Hotel Owner], a [jurisdiction and type of entity], and [Management Company], a [jurisdiction and type of entity].”
The appropriate owner company structure that is party to the agreement will depend on the legal conditions of the jurisdiction of the property and the respective legal/tax advice. A standard structure to create flexibility and isolate risk would be to place the hotel property into a clearly defined SPV, limited to the ownership and financing of that specific hotel asset as the property company (PropCo) and to have a linked SPV as an operating company (OpCo).
The Hotel Property
The description of the Hotel Property is typically brief but sufficient to identify the specific property to which the agreement applies. The description sets the context for the agreement and avoids ambiguity by providing a clear reference to the property, including the name of the hotel (if already branded or named), the physical location (address, city, and country) and a general description of the property (e.g., “a luxury resort,” “a full-service hotel”):
The Hotel Property Example Text
For example: “WHEREAS, the Owner is the owner of a hotel property located at [address/location] (the ‘Hotel’), which the Owner desires to operate as a [specific brand or type of hotel].”
Licenses
If the hotel will operate under a specific brand, the preamble might mention the affiliation and the standards that must be upheld.
Licenses Example Text
For example: “WHEREAS, the Hotel will operate under the [brand name] flag and must comply with the standards and brand guidelines of [brand/franchisor].”
Relationship of the Parties
The preamble often acknowledges that the Owner has legal ownership or rights to the hotel property and has engaged the Operator to manage it on their behalf.
Relationship of the Parties Example Text – Ownership
For example: “WHEREAS, the Owner is the lawful owner of the property and associated facilities located at [address], comprising a [number of rooms]-room hotel to be operated under the terms of this Agreement.”
The HMA preamble briefly describes the contract’s primary purpose, i.e. for the operator to manage the hotel on behalf of the owner.
Relationship of the Parties Example Text – Primary Purpose
For example: “WHEREAS, the Owner desires to engage the Manager to operate and manage the Hotel, and the Manager agrees to provide such services under the terms set forth in this Agreement.”
Legal and Regulatory Compliance
Acknowledges the need for the agreement and the hotel’s operations to comply with relevant laws and regulations.
Legal and Regulatory Compliance Example Text
For example: “WHEREAS, both parties acknowledge that the management of the Hotel will be conducted in accordance with applicable laws, regulations, and standards.”