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The reason for the popularity of management contracts is that the expertise required to operate a large hotel is more readily available under such an arrangement. It enables a hotel owner to derive the benefit of owning a hotel without the requirement of having to operate it. However, despite its popularity, the management agreement is the most problematic of all operating concepts in the hospitality industry. The main challenge involves the agency relationship that arises from the separation of ownership and management, which can create a volatile mix of economics and power that can explode due to the differing time horizons of the owner and operator.
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