Hotel contracts getting more ‘even’ as owners negotiate harder on performance benchmarks

New Delhi | Mumbai: Hotel contracts in India are evolving as global and Indian chains aim to double their local portfolios by 2030, with property owners negotiating more explicitly on performance benchmarks, capital expenditure, and cybersecurity and data-related responsibilities, said industry insiders and legal experts.

Owners are also increasingly seeking exclusivity and non-compete provisions, as well as considering the ability of operators to introduce a competing brand in the same micro-market. This is making the contracts more detailed and balance of power more even compared with what used to be favourable to the operators, they said.

“Owners today want clarity on what happens if a brand does not deliver the expected results over a sustained period. Consequently, performance termination clauses and cure mechanisms are becoming more important,” said Deepak Jain, founder of Mayfair Consultants. Agreements are more specific about the costs and use of central reservation systems, digital platforms, cybersecurity and data-related responsibilities, he said.


The relationship is shifting from a traditional operator-owner arrangement to a “strategic partnership”, K Raheja Group chief executive Vijayta Raheja said. “Owners are far more informed today, negotiating more explicitly on performance benchmarks, fees, capex, and transparency around centralised costs. Contracts are increasingly built to address the entire lifecycle of a hotel, not just its operating period.”

Mumbai-headquartered K Raheja Group is launching a hospitality project in Maharashtra along with IHG Hotels & Resorts, which includes Voco Mumbai, Powai Hotel and Convention Centre and Holiday Inn Express & Suites. The project is expected to open in this financial year.

Owners of hotel properties in India have for some time been concerned around how risk is allocated and structured, experts said. These concerns stem from the limited ability of owners to hold operators accountable for key aspects of the hotel’s performance, particularly controlling cost overruns and maintaining healthy profits.

Meanwhile, operators are also increasingly offering greater economic support and flexibility to owners, which includes key money commitments, whereby operators contribute capital towards the development of the hotel, typically as part of strategic transactions, said Arjun Anand, partner at Antares Legal. “Operators are also providing for brand-standard freezes, allowing owners to defer or avoid expenditure arising from changes to brand standards implemented across the portfolio,” said Anand.

Priyanka Sinha, cofounder of the law firm A&P Partners, said domestic hotel chains illustrated the shift clearly, as they opt for franchise structures over full management contracts, leaving day-to-day operations and compliance with brand standards to the owner or an operator rather than the parent chain.

“This marks a stark change from a decade ago, when owners largely accepted operator-drafted terms with little room to negotiate. Today, owners are securing exit rights tied to clearly defined operator events of default, backed by structured cure period mechanisms,” said Sinha. “As the owner-side counsel, we often find that blanket indemnities in the operator’s favour have been substantially narrowed and, in several cases, removed entirely,” she added.

As chains pursue ambitious expansion plans, competition for quality assets has intensified, and the eventual bargain is increasingly tailored to the property, the market, and the parties’ respective strengths, said Megha Agarwal, partner at Khaitan & Co. “The result is not necessarily an owner-friendly contract but rather a more negotiated, asset-specific one,” she added.

Nandivardhan Jain, founder and CEO, NOESIS Hotel Advisors said India signed over 47,000 keys in the eleven months to November 2025, close to a third more than the year before, and much of that growth is in tier two and tier three cities.

"In those markets there are more brands looking than there are sites worth building on. When a dozen good operators want the same project, the terms move," he said.

"What genuinely moves today is the length of the agreement, the fee structure, the radius protection around the hotel and whether renewal rests with the operator alone or requires the owner's consent," he added.