Hotel Management Agreement (Pakistan)
HOTEL MANAGEMENT AGREEMENT
Under the Contract Act 1872 | Companies Act 2017 | Pakistan Tourism Development Corporation Act 1976
This Hotel Management Agreement ("Agreement") is entered into on [Agreement Date] at [City], between:
OWNER:
Name: [Owner Name]
CNIC / SECP Registration No.: [Owner CNIC SECP]
Address: [Owner Address]
Represented by: [Owner Rep Name]
OPERATOR:
Name: [Operator Name]
SECP Registration No.: [Operator SECP]
Address: [Operator Address]
Represented by: [Operator Rep Name]
1. THE HOTEL
1.1 Hotel Name: [Hotel Name]
1.2 Hotel Address: [Hotel Address]
1.3 Hotel Description: [Hotel Description]
1.4 PTDC Classification: [PTDC Classification]
1.5 PTDC Registration No.: [PTDC Reg No]
1.6 The Owner retains full ownership of the Hotel property throughout the term of this Agreement. The Operator acts as the Owner's agent in managing the Hotel — all hotel revenues are the Owner's property.
2. TERM AND COMMENCEMENT
2.1 This Agreement commences on [Commencement Date] and shall continue for an initial term of [Agreement Term] years, unless terminated earlier in accordance with the provisions of this Agreement.
2.2 The Operator shall assume management responsibility for the Hotel from the Commencement Date and shall operate the Hotel in accordance with this Agreement, the Brand Standards (if applicable), and the PTDC classification requirements under the Pakistan Tourism Development Corporation Act 1976.
3. MANAGEMENT FEES
3.1 Base Management Fee: [Base Management Fee]
3.2 Incentive Management Fee: [Incentive Fee]
3.3 Capital Expenditure Reserve Fund: [Capex Reserve]
3.4 Withholding Tax: The Owner shall deduct withholding tax from all management fee payments under Section 153 of the Income Tax Ordinance 2001 at the applicable rate, and shall issue a withholding tax certificate (Form 16A) to the Operator.
3.5 Services Tax: The Operator shall charge applicable provincial services tax (Punjab Revenue Authority / Sindh Revenue Board / KPK Revenue Authority) on management fee invoices as required by applicable law.
4. OPERATOR'S OBLIGATIONS
4.1 The Operator shall manage, operate, and maintain the Hotel in a professional manner consistent with the [PTDC Classification] PTDC classification and applicable brand standards.
4.2 The Operator shall manage all Hotel staff in compliance with the Industrial and Commercial Employment (Standing Orders) Ordinance 1968, the Minimum Wages Ordinance 1961, the Employees' Old-Age Benefits Act 1976, and applicable provincial social security ordinances.
4.3 The Operator shall provide the Owner with monthly financial reports in accordance with the Uniform System of Accounts for the Lodging Industry (USALI) within fifteen days of each month end.
4.4 The Operator shall not make capital expenditure exceeding PKR 500,000 per item without the Owner's prior written approval.
5. OWNER'S OBLIGATIONS
5.1 The Owner shall maintain a Hotel Operating Account in the Owner's name at a scheduled bank regulated by the State Bank of Pakistan, into which all Hotel revenues are deposited.
5.2 The Owner shall fund the Hotel Operating Account sufficiently to meet all Hotel operating expenses and shall not interfere with the Operator's day-to-day management decisions within the Operator's authority.
5.3 The Owner shall maintain the Hotel's property insurance under the Insurance Ordinance 2000 and shall maintain the PTDC classification in force.
6. TERMINATION
6.1 Either party may terminate this Agreement by giving [Notice Period Termination] written notice to the other party.
6.2 Either party may terminate immediately upon material breach by the other party that is not remedied within thirty days of written notice specifying the breach.
6.3 The Owner may terminate without penalty if the Hotel fails to achieve the agreed performance benchmarks for two consecutive operating years.
7. DISPUTE RESOLUTION AND GOVERNING LAW
7.1 Dispute resolution: [Dispute Resolution]
7.2 This Agreement is governed by the laws of Pakistan, principally the Contract Act 1872. The parties submit to the jurisdiction of the courts of [City] for any matter not subject to arbitration.
IN WITNESS WHEREOF, the parties have executed this Hotel Management Agreement on [Agreement Date] at [City].
For [Owner Name] (Owner):
Authorised Signatory: [Owner Rep Name]
Signature: _________________________ Date: _________________________
Company Seal: _________________________
For [Operator Name] (Operator):
Authorised Signatory: [Operator Rep Name]
Signature: _________________________ Date: _________________________
Company Seal: _________________________
Witness 1: _________________________ CNIC: _________________________
Witness 2: _________________________ CNIC: _________________________
Hotel Owner / Authorised Representative
________________
Signature
Operator / Management Company Representative
________________
Signature
What Is a Hotel Management Agreement (Pakistan)?
A Hotel Management Agreement in Pakistan defines what each party must do under the deal and the consequences of failing to perform.
The Pakistan tourism and hospitality industry has experienced significant growth driven by the opening of northern tourism routes including Gilgit-Baltistan, Azad Jammu and Kashmir (AJK), and Khyber Pakhtunkhwa to domestic and international tourists, the expansion of the China-Pakistan Economic Corridor (CPEC) hospitality infrastructure, and the growth of business travel to Karachi, Lahore, and Islamabad. International hotel chains — including Marriott International (operating the Islamabad Marriott and Pearl Continental group), Serena Hotels (a division of the Aga Khan Development Network operating under AKDN), Avari Hotels, PC Hotels (Pearl Continental, operated by the Hashwani Group), and Ramada by Wyndham — operate in Pakistan under hotel management agreements or franchise agreements subject to the Contract Act 1872.
The Pakistan Tourism Development Corporation Act 1976 established PTDC as the federal body responsible for promoting tourism, classifying hotels, and setting minimum standards for tourist facilities. PTDC's hotel classification system (one-star through five-star) requires hotels to meet specified physical and service standards, and PTDC classification certificates are referenced in hotel management agreements as the quality benchmark against which the Operator's performance is measured. Provincial tourism departments — including the Punjab Tourism, Sports, Archaeology, Museums and Youth Affairs Department, the Sindh Culture, Tourism and Antiquities Department, and the KPK Tourism Authority — have concurrent jurisdiction over tourist establishments within their respective provinces.
The Hotel Management Agreement in Pakistan is distinct from a franchise agreement (under which the Owner operates the hotel themselves using the franchisor's brand and systems, without the franchisor having operational management responsibility), from a lease agreement (under which the Operator leases the hotel from the Owner and bears the full risk of hotel operations), and from a service agreement (where specific services are contracted without the Operator having full management authority). The key distinction of a hotel management agreement is that the Operator acts as agent of the Owner — all hotel revenues are collected in the Owner's name, all hotel employees are ultimately employed by the Owner (though managed by the Operator), and the Owner bears the financial risk and reward of hotel operations while the Operator earns a management fee tied to performance.
The Federal Board of Revenue (FBR) under the Income Tax Ordinance 2001 requires withholding tax on management fee payments under Section 153, and the Sales Tax Act 1990 and provincial sales tax on services legislation (Punjab Revenue Authority, Sindh Revenue Board, KPK Revenue Authority) impose services tax on hotel management fees. The Competition Commission of Pakistan (CCP) established under the Competition Act 2010 has oversight of exclusive dealing arrangements in the hospitality sector that may restrict competition.
When Do You Need a Hotel Management Agreement (Pakistan)?
A Hotel Management Agreement in Pakistan is required across a range of hotel ownership and operation scenarios in the Pakistani hospitality industry.
A Hotel Management Agreement is needed when a real estate developer or investor who has constructed or purchased a hotel property in Lahore, Karachi, Islamabad, Peshawar, Quetta, or a tourism destination (Murree, Nathia Gali, Hunza, Swat, Skardu) wishes to engage a professional hotel management company to operate the property rather than establishing their own management capability. The agreement defines the Operator's authority, fee entitlements, brand standards obligations, and reporting requirements.
A Hotel Management Agreement is required when an international hotel brand — such as Marriott, Hilton, Hyatt, or Radisson — enters the Pakistani market through a management agreement with a local property owner, as the brand's standard legal documentation must be adapted to comply with the Contract Act 1872, PTDC regulations, SECP company law requirements for the Pakistani entity, and FBR tax obligations.
A Hotel Management Agreement is needed when the Pakistan Tourism Development Corporation (PTDC), provincial tourism departments, or government-owned hotel corporations engage a private operator to manage government-owned tourism properties — including PTDC Motels and Resorts across Pakistan — through a competitive bidding process under the Public Procurement Regulatory Authority (PPRA) Rules 2004.
A Hotel Management Agreement is required when a CPEC Special Economic Zone (SEZ) developer constructs a business hotel within the SEZ to serve Chinese and international investors and workers, and engages an operator with experience in the Chinese-Pakistani business travel market. CPEC hospitality projects require compliance with SECP regulations, China-Pakistan bilateral investment framework requirements, and the Special Economic Zones Act 2012.
A Hotel Management Agreement is needed when an Overseas Pakistani investor or Non-Resident Pakistani (NRP) acquires a hotel property in Pakistan and engages a local management company to operate it on their behalf, requiring protections against misappropriation of hotel revenues, clear reporting obligations, and a dispute resolution mechanism accessible to an overseas owner.
Parties in Pakistan should prepare a Hotel Management Agreement (Pakistan) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under the Companies Act 2017, the Securities and Exchange Commission of Pakistan (SECP) maintains the register of Pakistani companies. Section 16 of the Companies Act 2017 governs company incorporation. The Contract Act 1872 governs general contractual obligations. The Federal Board of Revenue (FBR) administers corporate tax under the Income Tax Ordinance 2001. The High Courts (Lahore, Sindh, Peshawar, Balochistan, Islamabad) have original and appellate jurisdiction. 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 (Pakistan)
A valid Hotel Management Agreement in Pakistan under the Contract Act 1872, PTDC regulations, and the Companies Act 2017 must contain the following essential elements to protect both the hotel Owner and the Operator.
Parties and Property Description: Full legal names of the Owner and the Operator (with SECP registration numbers and NTNs), the full description of the hotel property (address, land area, number of rooms and suites, classification category, PTDC registration number), and the commencement date of operations under the agreement.
Operator's Authority and Scope: A precise definition of the Operator's management authority — including the power to hire, manage, and terminate hotel staff (subject to labour laws including the Industrial and Commercial Employment (Standing Orders) Ordinance 1968); negotiate and enter into supply and service contracts on the Owner's behalf up to specified financial limits; set room rates, food and beverage pricing, and promotional policies; and make capital expenditure decisions up to an agreed threshold without requiring Owner approval.
Management Fee Structure: The base management fee (typically 2-4% of gross hotel revenues) and the incentive management fee (typically 8-10% of gross operating profit above a specified performance threshold), the calculation method, the frequency of payment (monthly, with quarterly reconciliation), and the bank account for fee remittance. Under Section 153 of the Income Tax Ordinance 2001, the Owner must deduct withholding tax on management fee payments.
Brand Standards and PTDC Classification: The brand standards and operating procedures manual (supplied by the Operator or the brand licensor) that the Operator must maintain throughout the agreement term, and the obligation to maintain the PTDC hotel classification (star rating) at the minimum agreed level. Failure to maintain the PTDC classification is typically a breach of the agreement entitling the Owner to terminate.
Hotel Revenue and Accounting: The accounting system to be used (typically the Uniform System of Accounts for the Lodging Industry, USALI), the bank account in the Owner's name into which all hotel revenues are deposited, the Operator's authority to draw from the hotel's operating account for expenses up to a specified limit, and the monthly, quarterly, and annual financial reporting obligations to the Owner. All hotel revenues are the Owner's property — the Operator has no proprietary interest in hotel revenues.
Staff and Labour Compliance: The Operator's obligation to manage hotel staff in compliance with the Industrial and Commercial Employment (Standing Orders) Ordinance 1968, the Minimum Wages Ordinance 1961, the Employees' Old-Age Benefits Act 1976 (EOBI), provincial social security ordinances (PESSI/SESSI), and the Workmen's Compensation Act 1923. The agreement must clarify whether hotel staff are employed by the Owner or the Operator, as this determines liability for terminal benefits.
Capital Expenditure and Maintenance: The annual capital expenditure budget process (typically requiring Owner approval for capex above PKR 500,000 per item), the Operator's obligation to maintain the property in good repair under the Transfer of Property Act 1882 principles, and the funding mechanism for a Capital Expenditure Reserve Fund (FF&E Reserve) — typically 3-5% of gross revenues set aside annually.
Term, Renewal, and Performance Tests: The initial term (typically 10-20 years for international brand agreements, 3-5 years for local operators), renewal options, and performance test criteria — if the hotel fails to achieve specified GOP (Gross Operating Profit) margins or RevPAR (Revenue Per Available Room) benchmarks for two consecutive years, the Owner may terminate without penalty. These provisions are strongly negotiated in Pakistani hotel management agreements.
Termination and Exit: The conditions for early termination by either party, the notice periods, the consequences of termination (transition of management, staff handover, settlement of accounts, removal of brand signage), and the Owner's obligation to pay a termination fee to the Operator for loss of future management fees in certain termination scenarios.
Forms-legal.com provides this Hotel Management Agreement (Pakistan) as a starting framework for Pakistani hotel ownership and operation arrangements. Both hotel owners and operators should obtain legal advice from a qualified Advocate enrolled at the Lahore Bar, Sindh Bar, or Islamabad Bar with experience in commercial and hospitality law, and should consult the Pakistan Tourism Development Corporation for the applicable hotel classification and licensing requirements.
Cite this page
Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Hotel Management Agreement (Pakistan) (Pakistan) [Legal document template]. Forms Legal. https://forms-legal.com/pakistan/business/services/hotel-management-agreement-pakistan
"Hotel Management Agreement (Pakistan) (Pakistan)." Forms Legal, 2026, https://forms-legal.com/pakistan/business/services/hotel-management-agreement-pakistan.
@misc{formslegal-hotel-management-agreement-pakistan,
author = {{Forms Legal}},
title = {Hotel Management Agreement (Pakistan) (Pakistan)},
year = {2026},
howpublished = {\url{https://forms-legal.com/pakistan/business/services/hotel-management-agreement-pakistan}},
note = {Free legal document template}
}
Frequently Asked Questions
A hotel management agreement and a franchise agreement are the two principal structures for branded hotel operation in Pakistan, and they differ fundamentally in how management responsibility and financial risk are allocated. Under a hotel management agreement, the Operator (typically an international brand or professional management company) takes full operational control of the hotel — hiring staff, setting rates, managing finances, and making day-to-day decisions — while the Owner retains ownership of the property and bears the financial risk and reward of hotel operations. The Operator earns a management fee (base fee of 2-4% of revenues plus incentive fee of 8-10% of gross operating profit). Under a franchise agreement, the Owner (franchisee) operates the hotel themselves using the brand's systems, standards, and reservation network, paying the franchisor a franchise fee (typically 5-7% of room revenues) but retaining full operational control and responsibility. In Pakistan, international brands such as Marriott, Serena, and PC Hotels predominantly use management agreements, while smaller regional brands may offer franchise options. The Contract Act 1872 governs both structures, but management agreements create a principal-agent relationship (Operator as agent of Owner) while franchise agreements are purely contractual licences to use the brand.
The Pakistan Tourism Development Corporation (PTDC), established under the Pakistan Tourism Development Corporation Act 1976 and operating under the Ministry of Tourism, plays a regulatory role in the hotel industry through its hotel classification system. PTDC classifies hotels from one-star to five-star based on physical facilities (number of rooms, room sizes, bathroom standards, swimming pool, business centre, fitness facilities), food and beverage quality, and service standards. The PTDC classification certificate is required for hotels to legally advertise a star rating, and it is renewed periodically following PTDC inspection. Hotel management agreements in Pakistan routinely reference the PTDC classification as the minimum quality benchmark that the Operator must maintain, with failure to maintain the classification level being a ground for Owner termination of the agreement. PTDC also directly operates a chain of motels, rest houses, and tourist facilities across Pakistan — particularly in northern areas — and engages private operators through competitive management agreements for some of these properties. Provincial tourism authorities (Punjab Tourism, KPK Tourism Authority, Sindh Culture, Tourism and Antiquities Department) have concurrent powers to regulate tourist establishments within their provinces under provincial tourism legislation.
Hotel management fees in Pakistan are subject to withholding tax and services tax. Under Section 153(1)(b) of the Income Tax Ordinance 2001, the hotel Owner (as the payer of service fees) must deduct withholding tax from management fee payments at the applicable rate — currently 3% for filer management companies and 6% for non-filer management companies on gross payments. The withheld tax is deposited with FBR and the management company claims it as a credit in its annual income tax return. Under provincial sales tax on services legislation, hotel management services are taxable as 'services' — the Punjab Revenue Authority (PRA), Sindh Revenue Board (SRB), KPK Revenue Authority (KPKRA), and Balochistan Revenue Authority (BRA) each levy sales tax on services at rates ranging from 13% to 16% on the management fee. The management company must register as a services taxpayer with the relevant provincial revenue authority and charge sales tax on its invoices to the hotel Owner. The hotel's own revenues — room revenue, food and beverage, banqueting — are subject to FBR income tax (on hotel profits) and provincial sales tax on services on room charges and food and beverage sales.
Hotel staff in Pakistan are subject to multiple layers of labour law regardless of whether they are technically employed by the Owner or the Operator. The Industrial and Commercial Employment (Standing Orders) Ordinance 1968 applies to hotels with twenty or more workers, requiring certified Standing Orders, formal appointment letters, and maintenance of an employee register. The Minimum Wages Ordinance 1961 and provincial Minimum Wages Board notifications set floor wages — hotels in Lahore, Karachi, and Islamabad must comply with the applicable provincial minimum wage notifications for different job categories (skilled, semi-skilled, unskilled). The Employees' Old-Age Benefits Act 1976 requires EOBI registration and monthly contributions for all hotel employees. The Provincial Employees' Social Security Ordinance (PESSI in Punjab, SESSI in Sindh) applies to hotels in defined industry categories, requiring social security registration and health card issuance. The Workmen's Compensation Act 1923 requires hotel employers to maintain accident compensation records. The hotel management agreement must clearly allocate these compliance obligations between the Owner and the Operator, and specify which party bears terminal benefit liabilities (gratuity under the Industrial and Commercial Employment Ordinance and EOBI pension) at the end of the management agreement.
Early termination of a hotel management agreement in Pakistan is governed by the specific termination provisions of the agreement and by the general law of contracts under the Contract Act 1872. Most hotel management agreements contain performance test provisions — if the hotel fails to achieve specified financial benchmarks (RevPAR index, Gross Operating Profit margin, or GOP per available room) for two consecutive operating years, the Owner may terminate without paying a termination fee, with sixty to ninety days' notice. Without a performance test failure, early termination by the Owner typically requires payment of a significant termination fee — calculated as the net present value of future management fees for the remaining term, which can amount to tens of millions of PKR for long-term international brand agreements. Early termination by the Operator for Owner's breach (typically non-payment of management fees, failure to fund capital expenditure, or interference with management authority) entitles the Operator to damages under Section 73 of the Contract Act 1872. Sale of the hotel to a third party does not automatically terminate the management agreement — most agreements require the Owner to procure the new owner's assumption of the agreement as a condition of sale, or to pay the termination fee if the new owner declines to assume the agreement.
Hotel management agreements in Pakistan — particularly those involving international hotel brands — typically provide for international arbitration rather than Pakistani court litigation, reflecting the international nature of the hotel industry and the desire of foreign operators for a neutral dispute resolution forum. The most common arbitration seats specified in Pakistani hotel management agreements are Singapore (Singapore International Arbitration Centre — SIAC), London (London Court of International Arbitration — LCIA), or Dubai (Dubai International Arbitration Centre — DIAC). Pakistani courts enforce foreign arbitral awards under the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act 2011, which implements the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. For domestic hotel management agreements between Pakistani parties, arbitration under the Arbitration Act 1940 before a sole arbitrator or three-member panel is the preferred mechanism, with the seat at Lahore, Karachi, or Islamabad depending on the hotel's location. Some agreements provide for tiered dispute resolution — expert determination by an independent hospitality industry expert for operational disputes (such as disputes about the correct calculation of GOP), and arbitration for legal and financial disputes above a specified threshold.
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:
Advertising Agreement (Pakistan)
An Advertising Agreement for Pakistan — a contract between an advertiser and an advertising agency or media outlet for the creation, placement, and management of advertising campaigns, governed by the Contract Act 1872 and PEMRA Ordinance 2002.
BPO Services Agreement (Pakistan)
A BPO Services Agreement for Pakistan — a contract between a client and a business process outsourcing provider for outsourced back-office, customer service, or IT-enabled services, governed by the Contract Act 1872 and Pakistan Telecommunication Authority regulations.
Call Centre Agreement (Pakistan)
A Call Centre Agreement for Pakistan — a contract between a client and a call centre operator for provision of inbound or outbound customer service, telemarketing, or BPO services, governed by the Contract Act 1872 and the Pakistan Telecommunication Authority regulations.
Canteen Contractor Agreement (Pakistan)
A Canteen Contractor Agreement for Pakistan — a contract between an establishment and a canteen operator for provision of food and catering services to employees, governed by the Contract Act 1872, the Factories Act 1934, and applicable food safety regulations.
Catering Services Agreement (Pakistan)
A Catering Services Agreement for Pakistan — a contract between a client and a catering company for provision of food, beverages, and related services at events or premises, governed by the Contract Act 1872, the Punjab Food Authority Act 2011, and applicable provincial food safety regulations.