Hotel/resort management rights, do they exist in the US?

[Andrew O.]

Hi all,

Been awhile since I was here, happens when you should be looking for the next deal, but the money is flowing. I have contacts and investments in a particular business model in Australia, returning ~20% net (downside being exposure to a somewhat volatile currency) plus capital gains.

The model involves the rights to manage hotels/ vacation apartment rentals/resorts. So a developer builds a hotel, sells the units, and as an extra kicker sets an agreement that all the units must be managed by a separate management company, and sells that right to manage. Whoever buys these rights receives commission on room rental, cleaning fees, repair contracts etc, much like a property management company. Except they usually have a 20 year contract, and have onsite managers. These rights at the moment sell for around 5.5x annual net profit, so increase the profit, increase the value. The kicker being this is one of the few business models where the banks are begging to lend money on, we have borrowed at 5.45% interest only, 75% LTV, which gets revisited every 2 years.

This may be a convoluted way to explain a simple concept, I know the industry in Australia, but the same buzz words don't bring anything up on a search in the US.

Is this a pipedream in America? If you want a better explanation simply search "management rights Australia"

Andrew