Hotel Management Agreement (India)
HOTEL MANAGEMENT AGREEMENT
This Hotel Management Agreement ("Agreement") is entered into on [Agreement Date] at [State], India, between:
OWNER: [Owner Name], CIN/PAN: [Owner CIN], having its registered office at [Owner Address] (hereinafter referred to as the "Owner"); and
OPERATOR: [Operator Name], GSTIN: [Operator GSTIN], having its registered office at [Operator Address] (hereinafter referred to as the "Operator").
1. RECITALS
1.1 The Owner is the lawful owner of the hotel property known as [Hotel Name], situated at [Hotel Address], comprising [Hotel Rooms] guest rooms/keys ("Hotel").
1.2 The Operator is a professional hotel management company with expertise in the operation, management, and marketing of hotel properties in India.
1.3 The Owner desires to appoint the Operator to manage and operate the Hotel on the Owner's behalf, and the Operator has agreed to do so on the terms and conditions set out herein.
1.4 This Agreement is governed by the Indian Contract Act 1872. The Operator shall act as the agent of the Owner in conducting the Hotel's business.
2. TERM
2.1 This Agreement shall commence on [Agreement Date] ("Commencement Date") and shall continue for an initial term of [Agreement Term] years ("Initial Term"), unless earlier terminated in accordance with Clause 9.
2.2 The Agreement may be renewed for a further term of equal duration by mutual written agreement signed at least 12 months before expiry of the Initial Term.
3. OPERATOR'S DUTIES AND AUTHORITY
3.1 The Operator shall manage, operate, and supervise all departments of the Hotel in accordance with: (a) the operating standards prescribed by the Operator; (b) the annual business plan approved by the Owner; (c) all applicable laws, including the FSSAI Act 2006 (for food and beverage), applicable state Excise Acts (for liquor), the Shops and Establishments Act, the Employees' Provident Funds Act 1952, and the Payment of Gratuity Act 1972.
3.2 The Operator shall, on the Owner's behalf and expense, employ, manage, and if necessary, terminate all hotel employees. The Operator shall comply with all applicable labour laws including the Industrial Disputes Act 1947, the Minimum Wages Act 1948, and the Contract Labour (Regulation and Abolition) Act 1970.
3.3 The Operator shall obtain and maintain all operational licences required for the Hotel's operation, including the FSSAI licence, liquor licence, fire safety NOC, and foreign nationals registration compliance under the Foreigners Act 1946.
4. MANAGEMENT FEES
4.1 Base Management Fee: The Owner shall pay the Operator a base management fee of [Base Fee Pct]% of Total Revenue of the Hotel per calendar month, payable within 15 days of the end of each month.
4.2 Incentive Management Fee: The Owner shall pay the Operator an incentive management fee of [Incentive Fee Pct]% of Gross Operating Profit (GOP) per annum, calculated and payable quarterly in arrears, subject to the Owner first receiving its agreed priority return as set out in Schedule B.
4.3 All fees are exclusive of applicable GST. The Operator shall issue GST-compliant invoices including its GSTIN.
5. FF&E RESERVE
5.1 An FF&E (Furniture, Fixtures and Equipment) Reserve shall be established at [FFE Reserve Pct]% of Total Revenue per annum, deducted from operating revenues before distribution to the Owner. The Reserve shall be maintained in a separate account in the Owner's name and used exclusively for capital maintenance, refurbishment, and equipment replacement at the Hotel.
5.2 Expenditure from the FF&E Reserve above ₹5,00,000 per item requires prior written approval of the Owner.
6. BUDGETING AND REPORTING
6.1 The Operator shall prepare and submit an Annual Business Plan (including operating budget, capital expenditure budget, and marketing plan) to the Owner for approval at least 60 days before each financial year.
6.2 The Operator shall provide the Owner with [Reporting Frequency] financial statements prepared in accordance with the Uniform System of Accounts for the Lodging Industry (USALI) and applicable Indian Accounting Standards.
6.3 The Owner shall have the right to audit the Hotel's accounts at any time upon 7 days' written notice, at the Owner's cost.
7. PERFORMANCE TEST
7.1 The Hotel's performance shall be assessed against the following metric: [Performance Test]. Specific targets shall be set out in Schedule C to this Agreement.
7.2 If the Hotel fails to meet the performance test for two consecutive financial years, the Owner shall give the Operator written notice of underperformance. The Operator shall have 12 months ("Cure Period") to remedy the underperformance.
7.3 If the Hotel continues to underperform at the end of the Cure Period, the Owner may terminate this Agreement by giving 6 months' written notice, without payment of any termination fee.
8. OWNER'S OBLIGATIONS
8.1 The Owner shall: (a) provide and maintain the Hotel property in good repair and condition; (b) provide adequate working capital as agreed in the Annual Business Plan; (c) refrain from interfering with the Operator's day-to-day management of the Hotel; (d) obtain and maintain the Hotel's building occupancy certificate, municipal trade licence, and fire safety certificate.
9. TERMINATION
9.1 The Owner may terminate this Agreement: (a) for material breach by the Operator unremedied within 60 days of notice; (b) upon performance test failure as per Clause 7.3; (c) in connection with a sale of the Hotel to a third party, subject to payment of a termination fee equal to 12 months' base management fees.
9.2 The Operator may terminate this Agreement: (a) for material breach by the Owner unremedied within 60 days of notice; (b) for failure of the Owner to fund working capital within 30 days of demand.
9.3 Upon termination, the Operator shall vacate the Hotel within 30 days and deliver all records, keys, and assets of the Hotel to the Owner.
10. GOVERNING LAW AND DISPUTES
10.1 This Agreement shall be governed by the laws of India and the State of [State].
10.2 Any dispute shall be referred to arbitration under the Arbitration and Conciliation Act 1996, with a panel of three arbitrators, seated in [State]. The language of arbitration shall be English.
11. EXECUTION
This Agreement is executed on [Agreement Date] at [State] on non-judicial stamp paper of appropriate value under the Indian Stamp Act 1899.
Witness 1 Name & Signature: ____________________
Witness 2 Name & Signature: ____________________
Owner
________________
Signature
Operator
________________
Signature
What Is a Hotel Management Agreement (India)?
A Hotel Management Agreement in India governs the arrangement between the parties and the conditions on which it operates.
HMAs are widely used in India's rapidly growing hospitality sector. India's hotel industry includes domestic brands (Taj Hotels, Oberoi, ITC Hotels, Lemon Tree, Sarovar, OYO) and international brands (Marriott, Hilton, IHG, Hyatt, Accor, Radisson) operating under management agreements with Indian hotel owners. The sector is governed by the Indian Contract Act 1872, with specific regulations from FSSAI (food service), state Excise Acts (liquor service), the Ministry of Tourism (voluntary classification), and municipal authorities (trade and fire safety licences).
Unlike a lease or franchise, the management company under an HMA does not take possession of the property as a tenant, nor does it pay a licence fee — instead, it operates as the owner's agent, with the financial results (revenues and expenses) flowing directly to the owner. The management company bears reputational risk (its brand) but limited financial risk. The owner bears all financial risk but benefits from the operator's brand, distribution networks, and operational expertise.
The legal framework governing the Hotel Management Agreement (India) in India draws on several key statutes and regulatory bodies. Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). The Industrial Disputes Act 1947 and state labour commissioners govern employment disputes. The Information Technology Act 2000 and IT (Reasonable Security Practices) Rules 2011 protect personal data. The Income Tax Act 1961 and Goods and Services Tax Act 2017 govern tax obligations through the Central Board of Direct Taxes (CBDT) and GST Council. Parties executing a Hotel Management Agreement (India) in India should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Indian Contract Act, 1872 sets the foundational requirements.
When Do You Need a Hotel Management Agreement (India)?
A Hotel Management Agreement is needed whenever a hotel owner decides to delegate the operational management of a hotel to a professional management company rather than self-managing.
Investors and developers who build or acquire hotel properties typically lack the hospitality management expertise, brand recognition, global distribution systems (GDS), and loyalty programmes that drive occupancy and revenue. Appointing a reputable management company under an HMA allows the owner to benefit from these capabilities while retaining ownership of the real estate.
Owners of existing hotels who are dissatisfied with current management, or who need to rebrand a hotel to improve its competitive positioning, may replace the existing management company or brand by entering into a new HMA.
Hotel owners seeking financing from banks or private equity funds often find that lenders require a bankable HMA with a reputable brand as a condition of financing — the brand's involvement provides lenders with comfort about the hotel's future cash flows.
Conversion agreements — where an independently operated hotel is brought under a brand flag through a conversion HMA or franchise agreement — are another common scenario requiring a formal HMA.
Any owner-operator arrangement for a hotel property with more than 15 rooms should be supported by a thorough written HMA to avoid disputes about management authority, fee calculations, capital expenditure, and termination rights.
Parties in India should prepare a Hotel Management Agreement (India) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). The Industrial Disputes Act 1947 and state labour commissioners govern employment disputes. The Information Technology Act 2000 and IT (Reasonable Security Practices) Rules 2011 protect personal data. The Income Tax Act 1961 and Goods and Services Tax Act 2017 govern tax obligations through the Central Board of Direct Taxes (CBDT) and GST Council. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.
What to Include in Your Hotel Management Agreement (India)
A well-drafted India Hotel Management Agreement should include the following key elements.
Party and Property Details: Full legal names of owner and operator, hotel name and address, number of rooms, and property description.
Term: Initial term (typically 10–20 years for branded HMAs), renewal options, and early termination provisions.
Management Fees: Base management fee (% of total revenue), incentive management fee (% of GOP), owner's priority return mechanism, and central services charges.
Operating Standards: Brand standards the operator must maintain, quality audits, and consequences of non-compliance.
Budgeting and Reporting: Annual business plan approval process, monthly and annual financial reporting, format of accounts (typically Uniform System of Accounts for the Lodging Industry — USALI), and the owner's inspection rights.
FF&E Reserve: Contribution rate, account control, and expenditure approval process.
Working Capital: Owner's obligation to fund working capital, replenishment, and operator's authority to draw on funds.
Staffing: The operator's authority to hire, manage, and terminate hotel employees; whether employees are on the owner's or operator's payroll; compliance with labour laws.
Performance Tests: Financial and market performance metrics, cure periods, and owner's termination right for underperformance.
Sale and Assignment: Owner's right to sell the property, operator's consent rights or right of first offer, and consequences for the HMA on sale.
Governing Law and Arbitration: Applicable law and dispute resolution — typically arbitration under the Arbitration and Conciliation Act 1996 or international arbitration.
Additional compliance elements for a Hotel Management Agreement (India) used in India include: Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). The Industrial Disputes Act 1947 and state labour commissioners govern employment disputes. The Information Technology Act 2000 and IT (Reasonable Security Practices) Rules 2011 protect personal data. The Income Tax Act 1961 and Goods and Services Tax Act 2017 govern tax obligations through the Central Board of Direct Taxes (CBDT) and GST Council. Forms-legal.com provides this template as a starting point for India-compliant documentation.
Cite this page
Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Hotel Management Agreement (India) (India) [Legal document template]. Forms Legal. https://forms-legal.com/india/business/services/hotel-management-agreement-india
"Hotel Management Agreement (India) (India)." Forms Legal, 2026, https://forms-legal.com/india/business/services/hotel-management-agreement-india.
@misc{formslegal-hotel-management-agreement-india,
author = {{Forms Legal}},
title = {Hotel Management Agreement (India) (India)},
year = {2026},
howpublished = {\url{https://forms-legal.com/india/business/services/hotel-management-agreement-india}},
note = {Free legal document template. Based on Indian Contract Act, 1872}
}
Frequently Asked Questions
A Hotel Management Agreement (HMA) is a contract under which a hotel owner (typically a real estate company, trust, or individual investor) appoints a professional hotel management company (the operator) to manage, operate, and supervise all aspects of a hotel property on the owner's behalf and at the owner's expense, in exchange for management fees. The operator runs the hotel under its own brand, systems, and standards, while the owner retains ownership of the hotel real estate and takes the net profits or bears the losses. In India, HMAs are governed by the Indian Contract Act 1872 as service contracts. The relationship between the owner and operator has evolved significantly over the decades — early HMAs (particularly those with international brands like Taj, Oberoi, ITC, or Marriott) were heavily operator-friendly, with long terms (20–30 years), limited owner termination rights, and performance guarantees that were difficult to enforce. Contemporary HMAs in India tend to be more balanced, with shorter initial terms (10–15 years), owner-friendly termination provisions, and performance test mechanisms. The legal characterisation of the operator's role is important: the operator typically acts as an agent of the owner in conducting the hotel's business (entering into contracts, employing staff, procuring goods and services) — meaning the owner bears the financial and legal consequences of the hotel's operations. The operator is not a tenant (lessee) or a franchisee, but a manager acting under authority delegated by the owner.
The financial structure of a Hotel Management Agreement in India typically involves two tiers of management fees, an owner's priority return mechanism, and various expense reimbursements. Base Management Fee: The operator charges a base management fee calculated as a percentage of Total Revenue (sometimes called Gross Revenues or Gross Operating Revenue). Industry standard in India is typically 1.5% to 3% of Total Revenue, depending on the operator's brand positioning (international luxury brands command higher fees). Total Revenue is usually defined to include rooms revenue, food and beverage revenue, and other operating revenues, excluding taxes, gratuities, and service charges. Incentive Management Fee: In addition to the base fee, operators charge an incentive fee (also called performance fee) calculated as a percentage of Gross Operating Profit (GOP) or a metric derived from it. Typical rates are 6% to 10% of GOP. Some agreements tie the incentive fee to the achievement of agreed GOP targets or Owner's Priority Return thresholds. Owner's Priority Return: Many modern Indian HMAs include a mechanism that prioritises distributions to the owner — the owner receives a priority return (e.g., 8% to 12% of the owner's invested capital per annum) before the operator's incentive fee is calculated. This gives the owner a guaranteed return threshold and aligns the operator's incentive with the owner's profitability.
Termination rights are one of the most heavily negotiated aspects of a Hotel Management Agreement in India. Historically, operator-drafted HMAs were extremely restrictive on owner termination rights, effectively making the operator's position irremovable for the full term. Owners have increasingly pushed back, and modern agreements include several owner-protective termination provisions. Performance Termination: The owner should seek the right to terminate if the hotel fails to meet agreed financial performance tests over a specified period — typically two consecutive years. The performance test might be framed as: (a) the hotel's GOP falls below an agreed percentage (e.g., 80%) of the GOP specified in the agreed annual business plan; and (b) the hotel's RevPAR (Revenue per Available Room) performance index (against a competitive set of comparable hotels) falls below an agreed threshold (e.g., 95% of the competitive set). The operator is typically given a cure period (6–12 months) to remedy performance failures before termination is exercised. Change of Control / Sale Termination: The owner should have the right to terminate the HMA in connection with a sale of the hotel property to a third party, subject to payment of a termination fee. The termination fee is typically calculated as a multiple of the management fees earned in the most recent 12-month period; the multiple decreases over the term of the agreement.
Operating a hotel in India requires a significant number of licences and registrations from central, state, and local government authorities. The Hotel Management Agreement should clearly allocate responsibility for obtaining and maintaining these licences between the owner and the operator. Central Government Licences: FSSAI licence or registration for the food and beverage operations (hotels with revenue above ₹12 lakh per year require a central or state licence); GST registration; import-export code if relevant. State Government Licences: Shops and Establishments Act registration (for operating hours, employee records); liquor licence under the relevant state Excise Act (e.g., Maharashtra Excise Act, Karnataka Excise Act) — this is among the most important and difficult to obtain licences for hotels with bars and restaurants; Hotel and Restaurant licence under the relevant state Hotel and Restaurant Act. Local Authority / Municipal Licences: Building use/occupancy certificate from the local municipal body; trade licence; fire safety NOC from the fire department (mandatory; failure to maintain can result in closure); health trade licence; signage permission. Safety Licences: Lift/elevator inspection certificate from the state Boiler and Electrical Inspectorate; generator licence under the Electricity Act 2003; swimming pool licence (if applicable) from the municipal authority.
A Hotel Management Agreement (India) does not legally require a lawyer in India, and individuals and businesses may draft and execute the document independently. The Indian Contract Act, 1872 does not mandate legal representation for the creation or signing of this type of document. However, seeking independent legal advice from a qualified India lawyer is recommended for transactions involving substantial financial value, complex regulatory requirements, or cross-border elements where multiple legal jurisdictions may apply. A lawyer can verify that the document complies with all applicable statutory requirements, identify potential risks specific to the transaction, and confirm that the terms adequately protect the interests of all parties involved. The Supreme Court of India has jurisdiction over disputes arising from this type of document, and Registrar of Companies (ROC) may impose additional compliance obligations depending on the nature of the underlying transaction. Professional legal review is particularly advisable where the document will be submitted to government agencies or used as evidence in legal proceedings.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
Found an error? Let us knowRelated Documents
You may also find these documents useful:
Service Agreement (India)
A comprehensive service agreement under the Indian Contract Act 1872, GST Act 2017, and Arbitration & Conciliation Act 1996. Covers scope of services, GST-inclusive fees, SLA, confidentiality, IP ownership, liability cap, force majeure, and MSME-friendly payment terms.
Management Agreement (India)
A comprehensive management services contract for India covering property management, business management, and talent management. Governed by the Indian Contract Act 1872. Includes management fees, authority scope, fiduciary duties, and agency provisions.
Catering Agreement (India)
A professional catering services contract for India covering events, corporate canteens, and bulk food supply. Governed by the Indian Contract Act 1872 and FSSAI Act 2006. Includes menu, per-plate pricing, FSSAI licence, GST, and food safety compliance.