Hotel Management Agreement (Kenya)
HOTEL MANAGEMENT AGREEMENT
Tourism Act No. 28 of 2011 | Tourism Fund Act No. 29 of 2012 | Law of Contract Act Cap. 23
THIS HOTEL MANAGEMENT AGREEMENT is made on [Agreement Date]
BETWEEN:
(1) [Owner Name] (BRS: [Owner BRS Number]), of [Owner Address] (the "Owner"); and
(2) [Operator Name] (BRS: [Operator BRS Number]), of [Operator Address] (the "Operator").
1. THE HOTEL PROPERTY
1.1 The Owner appoints the Operator to manage and operate the hotel known as [Hotel Name], situated at [Hotel Address] (Title No: [Title Number]) (the "Hotel").
1.2 The Hotel is registered with the Tourism Regulatory Authority (TRA) under TRA Registration No. [TRA Reg Number] with a [Star Rating] classification, and has [Number of Rooms] rooms.
1.3 The Operator shall maintain the Hotel's TRA registration, star classification, and tourism enterprise licence in good standing throughout the term of this Agreement, in compliance with the Tourism Act No. 28 of 2011.
2. APPOINTMENT AND AUTHORITY
2.1 The Owner appoints the Operator as the Owner's exclusive agent for the management and operation of the Hotel with effect from [Commencement Date] for an initial term of [Initial Term].
2.2 The Operator shall manage the Hotel in accordance with this Agreement, the TRA classification standards, and the Owner's approved annual budget.
2.3 The Operator shall not grant sub-management rights to any third party without the Owner's prior written consent.
3. MANAGEMENT FEES
3.1 Base management fee: [Base Management Fee], payable [Fee Payment Frequency].
3.2 Incentive management fee: [Incentive Fee], payable annually after completion of the annual audit.
3.3 Financial reporting shall be prepared in accordance with [Accounting Standard]. Monthly management accounts shall be provided to the Owner within 15 days of each month end.
3.4 Tourism Levy: The Operator shall compute and remit the 2% Tourism Levy on the Hotel's gross turnover to the Tourism Fund quarterly, as required by the Tourism Fund Act No. 29 of 2012, and shall maintain records of all levy payments.
3.5 Withholding Tax: Where the Operator is non-resident, management fees are subject to withholding tax under Section 35 of the Income Tax Act Cap. 470 at the applicable rate, or the reduced rate under any applicable Double Taxation Agreement.
4. HOTEL STAFF AND EMPLOYMENT
4.1 Employer of record: [Employer of Record].
4.2 The employer of record shall ensure compliance with the Employment Act No. 11 of 2007, the Labour Relations Act No. 14 of 2007, NSSF contributions under the NSSF Act No. 45 of 2013, NHIF contributions, and PAYE withholding under the Income Tax Act Cap. 470.
4.3 The Operator shall implement and maintain staff training programmes consistent with the Hotel's star classification standards.
5. PERFORMANCE STANDARDS AND TERMINATION
5.1 The Operator shall maintain a minimum annual occupancy rate of [Minimum Occupancy Rate]. Failure to meet this standard shall entitle the Owner to issue a cure notice, and if not remedied within 90 days, to terminate this Agreement for cause.
5.2 Termination for convenience: Either party may terminate this Agreement on [Termination Notice Period] written notice, subject to payment of termination compensation calculated as follows: [Termination Compensation].
5.3 Termination for cause (material breach, insolvency, fraud, loss of TRA licence) does not require payment of termination compensation.
6. GOVERNING LAW AND DISPUTE RESOLUTION
6.1 This Agreement is governed by the laws of Kenya, including the Tourism Act No. 28 of 2011 and the Law of Contract Act Cap. 23.
6.2 Disputes shall be resolved by: [Dispute Resolution].
IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first written above.
Owner (authorised signatory)
________________
Signature
Operator (authorised signatory)
________________
Signature
Witness
________________
Signature
What Is a Hotel Management Agreement (Kenya)?
A Hotel Management Agreement in Kenya records the obligations the parties accept and the terms governing their arrangement.
Under the Tourism Act No. 28 of 2011, tourism enterprises — including hotels, lodges, camps, and guesthouses — must be registered and classified by the TRA before commencing operations. Section 3 of the Tourism Act defines a 'tourism enterprise' broadly to include any enterprise that provides accommodation, food and beverage services, or tourism-related services to visitors. The TRA Classification System, based on the Kenya Tourism Classification System published by the Ministry of Tourism and Wildlife, assigns star ratings from one to five stars to hotels and other accommodation facilities. A Hotel Management Agreement Kenya must confirm that the operator maintains the hotel's TRA classification and star rating throughout the management period, as a downgrade may constitute a performance default triggering the owner's rights under the agreement.
The Tourism Fund Act No. 29 of 2012 established the Tourism Fund (TF), which is funded by levies collected from tourism enterprises. Under the Tourism Fund Regulations, hotels and other accommodation establishments are required to remit a Tourism Levy of 2% of their gross turnover to the Tourism Fund quarterly. The Hotel Management Agreement Kenya must allocate responsibility for computing and remitting the Tourism Levy — typically a responsibility of the operator acting as agent of the owner — and must specify the accounting procedure for the levy and the consequences of non-remittance, which include suspension of the hotel's TRA licence.
The Kenya Revenue Authority (KRA) administers the Value Added Tax Act No. 35 of 2013 and the Income Tax Act Cap. 470 as they apply to hotel operations. Hotel accommodation and food and beverage services are subject to VAT at the standard rate of 16%, and hotels must be registered for VAT with the KRA and file monthly VAT returns via the iTax portal. Withholding Tax under Section 35 of the Income Tax Act Cap. 470 applies to management fees paid to a non-resident operator at the rate of 20% of the gross fee, or at the reduced rate under applicable Double Taxation Agreements (DTAs) between Kenya and the operator's country of residence. The Kenya-UK Double Taxation Agreement, the Kenya-France DTA, the Kenya-India DTA, and others negotiated by the National Treasury may reduce the applicable withholding tax rate.
The Hotel Management Agreement Kenya is also subject to the Employment Act No. 11 of 2007 and the Labour Relations Act No. 14 of 2007 administered by the Ministry of Labour and Social Protection, as the operator will typically employ hotel staff on behalf of the owner or as principal employer. The agreement must specify whether the operator or the owner is the employer of record for hotel staff, and must address compliance with the National Social Security Fund (NSSF) Act No. 45 of 2013 and the Social Health Insurance Act No. 16 of 2023 (which replaced the NHIF Act) contribution obligations. Any applicable Collective Bargaining Agreement (CBA) in the hospitality sector must be observed.
Data protection obligations under the Data Protection Act No. 24 of 2019, administered by the Office of the Data Protection Commissioner (ODPC), apply to hotel operations that collect and process guests' personal data including names, passport numbers, and payment card details. The Hotel Management Agreement Kenya should specify the operator's obligations as a data processor under Section 35 of the Data Protection Act and must address data breach notification requirements under Section 43 of the Act. The Competition Authority of Kenya (CAK) under the Competition Act No. 12 of 2010 also regulates pricing practices and market conduct in the hospitality sector.
When Do You Need a Hotel Management Agreement (Kenya)?
A Hotel Management Agreement in Kenya is needed whenever a property owner wishes to appoint a professional hotel operator to manage a hotel, lodge, resort, or serviced apartment complex on a day-to-day basis without personally running the hospitality business.
A Hotel Management Agreement Kenya is needed when a real estate developer who has constructed a hotel in Nairobi, Mombasa, Maasai Mara, Diani Beach, or another tourist destination does not have hospitality management expertise and wishes to engage an experienced international or regional hotel chain — such as Sarova Hotels, Fairmont, Radisson, or a local management company — to operate the property under an established brand. The Tourism Regulatory Authority (TRA) requires that the registered operator hold a current tourism enterprise licence under the Tourism Act No. 28 of 2011.
A Hotel Management Agreement Kenya is needed when an overseas investor acquires a hotel property in Kenya through a Foreign Direct Investment (FDI) transaction supportd by the Kenya Investment Authority (KenInvest) under the Investment Promotion Act No. 6 of 2004, and requires an experienced local or international operator to manage the property in compliance with TRA classification requirements and Kenyan labour and tax laws.
A Hotel Management Agreement Kenya is needed when a SACCO or investment chama that collectively owns a hotel or lodge property through a co-ownership structure wishes to appoint a single management entity to operate the property professionally, maintain its TRA registration, and maximise revenue for all co-owners. The management agreement creates clear accountability between the owners and the operator.
A Hotel Management Agreement Kenya is needed when a bank or financial institution, having taken over a hotel property as security for a non-performing loan under the Land Act No. 6 of 2012, appoints a hotel management company to operate the property during the period of enforcement, preserving the property's value and generating income to offset the outstanding debt.
A Hotel Management Agreement Kenya is needed when an existing hotel owner wishes to upgrade the property's management, rebrand under a new chain affiliation, or bring in specialised expertise for a specific segment — such as eco-tourism lodges operating under Kenya Wildlife Service (KWS) concessions, which require compliance with the Wildlife Conservation and Management Act No. 47 of 2013. In each case, a properly drafted Hotel Management Agreement protects the owner's asset, defines the operator's authority, and aligns incentives through a performance-linked fee structure.
What to Include in Your Hotel Management Agreement (Kenya)
A Kenya Hotel Management Agreement under the Tourism Act No. 28 of 2011 must contain the following essential elements to protect both the owner and the operator and to confirm regulatory compliance.
Parties and Property Details: Full legal names, Business Registration Service (BRS) numbers, KRA PINs, and registered addresses of the owner and the operator. The hotel property must be identified by its legal description (title number, plot number, land registration area), physical address, TRA registration number, and current star classification. The operator's TRA registration certificate number and tourism enterprise licence number must be referenced.
Appointment and Scope of Authority: The appointment of the operator as the owner's exclusive agent for hotel management, the scope of the operator's authority (including authority to enter into contracts for goods and services up to a specified value without prior owner approval), and any limitations on the operator's authority (e.g. Capital expenditure above a threshold requires owner approval). The operator must not grant sub-management rights without the owner's prior written consent.
Management Fees: The base management fee — typically calculated as a percentage (2–4%) of the hotel's total gross revenue — and the incentive management fee calculated as a percentage (8–12%) of gross operating profit (GOP), both defined in accordance with the Uniform System of Accounts for the Lodging Industry (USALI). Payment frequency, currency (Kenya Shillings or a foreign currency, subject to Central Bank of Kenya (CBK) foreign exchange regulations), and the timeline for financial reporting must be specified.
Budget and Financial Reporting: The operator's obligation to prepare and submit an annual operating budget and capital expenditure plan for the owner's approval. Monthly profit and loss statements, balance sheets, cash flow statements, and management accounts must be provided to the owner in USALI format. The owner's right to audit the hotel's accounts — by the owner's accountants or by external auditors such as those certified by the Institute of Certified Public Accountants of Kenya (ICPAK) under the Accountants Act No. 15 of 2008 — must be expressly stated.
Tourism Regulatory Compliance: The operator's obligation to maintain the hotel's TRA registration, star classification, and tourism enterprise licence in good standing throughout the agreement term. The operator must promptly notify the owner of any TRA inspection, complaint, or regulatory action. Responsibility for remitting the 2% Tourism Levy under the Tourism Fund Act No. 29 of 2012 must be clearly allocated.
Staff and Employment: Whether hotel staff are employed by the owner or by the operator, and the allocation of responsibility for: compliance with the Employment Act No. 11 of 2007; NSSF contributions under the NSSF Act No. 45 of 2013; NHIF contributions; PAYE withholding under the Income Tax Act Cap. 470; and compliance with the Labour Relations Act No. 14 of 2007 and any applicable Collective Bargaining Agreements (CBAs) in the hospitality sector.
Performance Standards and Termination: Minimum performance standards — such as minimum occupancy rate, minimum guest satisfaction score, and minimum GOP threshold — with a cure period for underperformance before the owner may terminate. Events of termination for cause (material breach, insolvency, fraud, loss of TRA licence) and termination for convenience (with notice period and compensation to the operator). Non-compete restrictions on the operator within a specified radius and period after termination.
Dispute Resolution: The agreement is governed by the laws of Kenya, including the Tourism Act No. 28 of 2011 and the Law of Contract Act Cap. 23. Disputes should be referred first to senior management of both parties, then to arbitration before the Nairobi Centre for International Arbitration (NCIA) under the Arbitration Act No. 4 of 1995, or to the High Court of Kenya. The forms-legal.com Kenya Hotel Management Agreement template covers all mandatory regulatory and commercial elements required under the Tourism Act No. 28 of 2011 and associated regulations.
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title = {Hotel Management Agreement (Kenya) (Kenya)},
year = {2026},
howpublished = {\url{https://forms-legal.com/kenya/business/services/hotel-management-agreement-kenya}},
note = {Free legal document template}
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Frequently Asked Questions
A hotel operator in Kenya must hold and maintain several licences and registrations under applicable law. Under the Tourism Act No. 28 of 2011, the hotel must be registered with the Tourism Regulatory Authority (TRA) as a tourism enterprise and must hold a valid tourism enterprise licence. The TRA Classification System assigns the hotel a star rating (1–5 stars) based on an inspection of facilities and services, and the rating must be displayed prominently. A single business permit must be obtained annually from the relevant County Government under the County Governments Act No. 17 of 2012, covering the hotel's trading activities. A public health licence is required from the County Government's public health department under the Public Health Act Cap. 242. A liquor licence is required from the County Government alcoholic drinks licensing board under the Alcoholic Drinks Control Act No. 4 of 2010, if alcohol is served. Food hygiene certification is required under the Food, Drugs and Chemical Substances Act Cap. 254. NTSA licences are required for hotel shuttle vehicles under the Traffic Act Cap. 403. The Kenya Copyright Board (KECOBO) licence is required for public performance of music in the hotel. The Hotel Management Agreement Kenya should specify which licences are the owner's responsibility and which are the operator's.
Hotel management fees paid to a resident management company in Kenya are subject to income tax under the Income Tax Act Cap. 470, and the recipient must declare the fees as business income and pay corporation tax at the rate of 30% (resident company) or 37.5% (non-resident company). Management fees paid to a non-resident operator are subject to withholding tax at the rate of 20% of the gross fee under Section 35 of the Income Tax Act Cap. 470 and the Fifth Schedule to the Act, unless a Double Taxation Agreement (DTA) between Kenya and the operator's country of residence provides for a lower rate. The Kenya Revenue Authority (KRA) administers DTAs with numerous countries including the UK, France, Germany, India, and South Africa. The owner (as payer) must withhold the applicable tax at source and remit it to the KRA by the 20th day of the following month. Management fees are also subject to VAT at 16% where the operator is VAT-registered in Kenya. The Hotel Management Agreement should address whether the stated management fee is inclusive or exclusive of VAT and withholding tax.
The Tourism Levy is a 2% charge on the gross turnover of tourism enterprises in Kenya, established under the Tourism Fund Act No. 29 of 2012 and the Tourism Fund Regulations. The levy is collected by the Tourism Fund (TF), a state corporation established under Section 3 of the Tourism Fund Act, which uses the funds to promote the tourism industry, support conservation activities, and assist tourism enterprises in distress. Hotels, lodges, camps, guesthouses, and other tourism enterprises registered under the Tourism Act No. 28 of 2011 are required to remit the Tourism Levy quarterly to the Tourism Fund, based on their gross turnover from accommodation, food and beverage, and ancillary services. The Hotel Management Agreement Kenya should specify that the operator is responsible for computing and remitting the Tourism Levy on behalf of the owner as the registered tourism enterprise, and for maintaining records of levy payments for inspection by the TRA and the Tourism Fund. Failure to remit the Tourism Levy is an offence under the Tourism Fund Act and may result in suspension of the hotel's TRA registration.
A hotel owner in Kenya may terminate a Hotel Management Agreement before the end of its stated term in two ways: termination for cause (also called termination for breach) and termination for convenience. Termination for cause arises where the operator commits a material breach of the agreement — such as fraud, misappropriation of hotel funds, loss of the TRA licence, gross negligence, or insolvency — and fails to remedy the breach within the contractually specified cure period (typically 30 to 60 days). Termination for cause generally does not trigger a termination payment to the operator. Termination for convenience — i.e. Termination without a specific breach — requires the owner to give the agreed notice period (often 6 to 12 months) and to pay the operator a termination compensation fee, which is commonly calculated as the average annual management fee multiplied by the number of remaining years of the agreement. The Arbitration Act No. 4 of 1995 and the Law of Contract Act Cap. 23 govern disputes about wrongful termination. Before terminating, the owner should obtain legal advice to assess the exposure to termination compensation claims.
The allocation of employer status for hotel staff under a Kenya Hotel Management Agreement varies between structures. In the most common structure, the owner is the legal employer of all hotel staff, and the operator manages the staff as the owner's agent. In this structure, the owner bears all employment law obligations under the Employment Act No. 11 of 2007, including NSSF contributions under the NSSF Act No. 45 of 2013, NHIF contributions, PAYE withholding under the Income Tax Act Cap. 470, and compliance with any applicable Collective Bargaining Agreement (CBA) in the hospitality sector registered with the Employment and Labour Relations Court under the Labour Relations Act No. 14 of 2007. In an alternative structure, the operator is the employer of record and recharges employment costs to the owner as a hotel expense. Each structure has different tax and liability implications. The Hotel Management Agreement Kenya must specify which party is the employer of record and must address the handling of redundancies, disputes, and employment litigation. The Employment and Labour Relations Court has exclusive jurisdiction over employment disputes under the Employment and Labour Relations Court Act No. 20 of 2011.
A Kenya Hotel Management Agreement should include measurable performance standards against which the operator's performance is evaluated on an annual or semi-annual basis. Common performance standards include: minimum occupancy rate (e.g. 65% annual average); minimum Revenue Per Available Room (RevPAR) target benchmarked against comparable hotels in the same market; minimum Gross Operating Profit (GOP) margin; minimum guest satisfaction score on platforms such as TripAdvisor or the hotel's proprietary survey system; maintenance of the TRA star classification; and compliance with all applicable licences and regulations. The Tourism Regulatory Authority (TRA) conducts periodic inspections and may downgrade a hotel's star rating for substandard facilities or service — a TRA downgrade may constitute a performance default under the Hotel Management Agreement triggering the owner's right to cure notice. An Independent Comparison Test (ICT) clause — which benchmarks the hotel's performance against a competitive set of comparable properties — is increasingly included in international hotel management agreements applicable to Kenyan properties and provides an objective metric for measuring operator performance.
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
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