Contract Clause
1. Base Management Fee
2. Subordinated
Management Fee
3. Operator SystemReimbursable
Expenses
4. Technical Assistance
Services Fee
5. Purchasing and
Installation of
FF&E/OS&E Services
Fees
6. Pre-Opening Services
Fee
Exhibit E
Matrix of Proposed Fees and Key Business Terms for Management Services
(To be completed by Respondent in space provided in right-hand column below)
Requested by Airport
Section I−Proposed Fees
Subject to review and agreement by Bond Counsel and the terms of Rev. Proc. 97-13, provide proposed
fixed base management fee, which fee may vary depending on the applicable year of the term.
According to Rev. Proc. 97-13, the management fees may not be based, in whole or in part, on a share of
net profits from the operation of the Hotel (mandatory requirement).
The Airport desires the base management fee in the startup years be minimized in order to maximize
revenues available for debt service.
The Airport anticipates that the terms of the bond documents would require that a portion of the
management fee payable to the Operator be subordinated/deferred to the payment of debt service to the
bondholders. Subject to review and agreement by Bond Counsel and the terms of Rev. Proc. 97-13,
Respondents are requested to offer a proposal for subordination/deferral of a portion of their management
fee, including the amount of fixed management fee to be subordinated and the terms of
subordination/deferral.
Provide the proposed reimbursement, in a usual and customary manner, for the cost of all centralized chain
services, including, but not limited to, national advertising, national sales, central reservations, technology,
payroll, accounting, training, and loyalty/rewards programs, etc.
Also certify, in a form acceptable to Airport's Bond Counsel, that these costs are allocated to each hotel in a
fair and equitable manner, and that these costs do not include any direct or indirect profit to the Operator or
its affiliates.
Provide the proposed fee and duration for Technical Assistance Services related to the Hotel’s
development. The Technical Assistance fee is intended to include all costs associated with personnel,
administrative, travel, and miscellaneous expenses. (See Section IV. B. of the RFP for further details.)
The Operator, a division thereof, or a third-party purchasing agent will be responsible for the Purchasing
and Installation of the FF&E/OS&E required to fully furnish/equip the Hotel prior to its opening. Provide
the proposed fees and duration for such services, as well as the recommended purchasing process. (See
Section IV. C. of the RFP for further details.)
Provide the proposed Pre-Opening Services management fee and duration. The fee is intended to include
all costs associated with personnel, administrative, travel, and miscellaneous expenses. (See Section IV. D.
of the RFP for further details.)
Offered by Operator
Contract Clause
7. Qualified Management
Agreement (mandatory)
8. Term of Hotel
Management
Agreement (mandatory)
9. FF&E Replacement
Reserves
10. Capital Replacement
Reserves
11. Working Capital
Requirement
Requested by Airport
Section II−Key Business Terms
Confirm that the Hotel will be managed by the Operator under an HMA (a “Qualified Management
Agreement”) that complies with Operating Guidelines for Management Contracts as set forth in the IRS
Revenue Procedure 97‐13 and the Internal Revenue Code of 1986, as amended, and as interpreted by the
Airport's Bond Counsel.
Subject to review and agreement by Bond Counsel and the terms of IRS Rev. Proc. 97-13, initial term
generally must not be longer than either 15, 10, or 5 years depending on the percentage of annual
compensation that is based on a periodic fixed fee; thereafter, the HMA may be renewable for successive
terms.
The Airport desires to enter into an HMA whereby a greater portion of the management fees can vary with
revenues. For example, under a 15-year contract, 95% of the management fees must be fixed. This can
create cash flow stress during economic downturns. Reducing the term to 10 years requires 80% of the fees
to be fixed, allowing for flexibility during economic downturns. Reducing the term to five 5 years requires
only 50% of the fees to be fixed, allowing for more flexibility during economic downturns.
Therefore, the Airport is seeking an initial term of 10 years, with one renewal term of 5 years. The Airport
shall have the right and option to extend the initial term at the sole discretion of the Airport.
FF&E reserves up to 5% of gross revenues will be included as an expense of the Hotel after the payment of
base management fees and before the payment of debt service. Confirm that FF&E reserves will be limited
to amounts provided for such purpose in the bond documents. The Airport desires the FF&E reserve fees to
ramp-up in the startup years in order to maximize revenues available for debt service.
To clarify, the FF&E replacement reserves are contributions to reserve for renewal, repair, and replacement
of furnishings, fixtures, and equipment (e.g., bed sheets, chairs, new couches, etc.).
Capital replacement reserves (within the Airport’s sole control) of up to 2% of gross revenues will be
included after the payment of debt service.
For clarification, the capital replacement reserves are contributions to reserve for replacement of, and
additions to, major capital items (e.g., new heating system, HVAC, renovation of lobby, etc.).
Indicate amount of working capital reserves that should be retained for operations. Working capital shall
mean funds that are used in the day-to-day operation of the Hotel, including amounts sufficient for the
maintenance of change and petty cash funds; amounts deposited in operating bank accounts; receivables;
amounts deposited in payroll accounts; prepaid expenses; and funds required to maintain inventories, less
accounts payable and accrued current liabilities.
Offered by Operator
Contract Clause
12. Key Money
Contribution
13. Airport’s Right of
Termination Prior to
Hotel Opening
14. Performance Test
Termination Rights
15. Airport’s Right of
Early Termination for
Other Causes After
Hotel Opening
16. Conditions of
Operator’s Default
Requested by Airport
The Airport requires that Respondent indicate the amount and term of the financial contribution, if any, to
the Hotel Project that it would be willing to make.
The Airport is not seeking an equity investment in the Hotel Project.
Confirm and describe Airport’s rights to terminate the HMA without penalty prior to the Hotel’s opening
if: 1) Airport is unable to complete bond financing by an agreed-upon date; or 2) Prior to commencement
of construction, Airport determines the Hotel is no longer economically viable based on significant changes
in the local lodging market, or changes in financing, construction, or operating cost of the Hotel. Airport
requests free termination for the specified events.
Confirm and describe performance test terms, including triggering events, competitive set to be used, and
cure rights that will be available to Operator.
The Airport intends to negotiate performance termination rights for the following:
 Failure to achieve a certain level of gross operating profit to cover debt service
 Failure to achieve a RevPAR level compared to the competitive set
Confirm and describe Airport’s right to terminate the HMA upon any of the following events:
 Sale or change of control of Operator
 Material adverse change in Operator’s financial condition
 Material adverse change in Operator’s corporate support or marketing for 4-star/4-diamond hotels
 Any other event provided for in the bond documents
The following shall be considered events of default by Operator:
 Failure to pay amounts when due
 General breach of covenants
 Making of false representations
 Failure to continuously operate
 Failure to maintain insurance
 Failure to pay all applicable taxes
 Failure to maintain Qualified Management Agreement status
Cure periods shall generally be 15 days, subject to extension with due diligence, capped at 120 days.
Certain defaults, such as the Qualified Management Agreement default and the failure to maintain
insurance or pay applicable taxes or other sums, shall be subject to shorter cure periods.
Offered by Operator
Contract Clause
17. Definition of Hotel
Operating Standard
18. Limit on Changes in
Brand Standards
19. Owner Approval of
Operating and Capital
Spending Budgets
20. Owner Approval over
Department Heads
21. Owner Right to Lease
Restaurant, Retail,
and/or Spa Operations
22. Information Sharing
23. Operator to Employ
Hotel Employees
24. Marketing Budget for
Hotel Promotion
25. Protection Radius
26. Arbitration Provision
Requested by Airport
Confirm that Operator will operate Hotel as agent and fiduciary of Airport in a prudent and efficient
manner reasonably calculated to repay bondholders in accordance with the terms of the Bonds, to enhance
the value of the Hotel, and to further the goals of the Airport in development of a 4-star/4-diamond
property.
Confirm that after execution of the HMA and for the first 5 years of operation, Operator will not require
Airport to comply with any modified brand standards adopted by Operator if it would require material
alterations of the Hotel building, or would require Airport to purchase new FF&E/OS&E prior to end of
useful life of existing structural elements or FF&E/OS&E.
Confirm that Airport shall have reasonable approval rights over each annual marketing plan, operating
budget, and capital expenditure budget prepared by Operator. Confirm that Operator has no right to make
capital expenditures until Airport approves.
Confirm that Airport shall have a right to approve the General Manager of the Hotel, the Director of
Finance, Director of Food & Beverage, Director of Sales, and Director of Engineering. Describe
procedures for Airport to interview each proposed candidate for a position that requires Airport’s approval.
Confirm that Airport will have the right to lease the restaurant, retail, and/or spa operations to a third-party
operator, subject to Operator’s consent, which will not be unreasonably withheld.
Confirm that Operator will agree to provide reasonable and timely access to key personnel and information
required by the Asset Manager working on behalf of the Airport.
Confirm that Operator will be employer of all Hotel employees, and not of the Airport.
Describe amount or portion of marketing fees that will be used to directly promote Hotel, specifically for
individual business traveler and meetings demand.
The Airport requests a minimum radius/restricted area around the Hotel of 10 road miles that would be
applicable to Operator’s 4-star/4-diamond product. Describe the term of restricted area provision and any
restrictions that will apply to Operator within the area.
Confirm that Operator understands the HMA will not contain an arbitration provision.
Offered by Operator