Owners believe an AoP means real exclusivity. In most agreements, it means exclusivity from exactly one brand, and nothing else.
Almost every owner negotiating a hotel management agreement asks for, and receives, an Area of Protection — a defined zone in which the operator agrees not to place a competing hotel. It feels like a genuine safeguard against the operator quietly cannibalising its own investment. In practice, the standard version of this clause is narrower, and considerably more favourable to the operator, than most owners realise until the moment it actually matters.
The Same-Brand-Only Trap
The traditional, and still most common, form of Area of Protection restricts the operator only from placing another hotel under the identical brand within the defined zone. As major hotel companies have expanded into portfolios of twenty or more distinct brands, this narrow drafting has become a genuine problem rather than a technicality. As one senior hospitality lawyer has put it plainly: the area of protection generally covers only the specific brand, not potentially competing affiliated brands, meaning a brand family can open multiple flags appealing to exactly the same clientele in the same location without limitation. Operators will argue that each of their brands targets a genuinely distinct customer, and that different brands under common ownership do not truly compete with one another. That argument deserves real scepticism — it assumes a level of consumer differentiation between sister brands that frequently does not hold up in practice, particularly where two brands from the same portfolio sit at similar price points in the same market.
The Realistic Compromise: Same Market Segment
Operators will resist, strongly and predictably, any attempt to extend an Area of Protection across their entire brand portfolio — and a demand pitched at that level is unlikely to succeed. The more realistic and defensible negotiating position is to secure protection against any brand within the operator’s portfolio that competes in the same market segment as the subject hotel — upscale against upscale, midscale against midscale — rather than accepting protection limited to the single named brand alone. This does not eliminate the operator’s ability to grow its other, genuinely differentiated brands nearby, but it does close the most obvious and commercially damaging gap, where an operator opens a near-identical, similarly priced sister property a short distance away and diverts exactly the guests the subject hotel was built to capture.
Distance
How the protected zone itself is defined matters as much as which brands it covers. Vague geographic descriptions — an area loosely defined as a city’s downtown core, for instance — can fail an owner badly over the life of a twenty or thirty year agreement, as cities expand and commercial centres shift in ways that were genuinely unforeseeable at signing. Anchoring the protected area to specific, fixed coordinates rather than a descriptive boundary avoids ambiguity and prevents an operator from later arguing that a new development technically falls just outside a boundary that was never precisely mapped in the first place.
Time Period
Just as important, and just as often underestimated, is how long the protection actually lasts. It is common for the exclusion period attached to an Area of Protection to cover only a portion, and often only a small portion, of the full term of the management agreement — operators typically justify this by arguing that a stabilised, established property can compete effectively against a new entrant once it has had time to build its market position. An owner who does not scrutinise this point closely may discover that meaningful protection quietly expired years before the underlying management agreement itself, at precisely the point in the relationship when a competing sister brand could do the most damage.
Further Issues Worth Negotiating
- The merger and acquisition loophole. If the operator later merges with, or acquires, another hospitality company that happens to already operate a competing hotel within the protected area, does the Area of Protection still apply? This scenario is rarely addressed expressly, and owners should insist on a specific provision — ideally an option to terminate, or at minimum a defined remedy — covering competition that arises through corporate consolidation rather than a deliberate new development decision by the operator.
- A genuine, defined remedy for breach. An Area of Protection that simply promises the operator will not compete, without specifying what actually happens if it does, is considerably weaker than it appears. Owners should insist on a clearly stated consequence for breach — whether a right to terminate, a fee reduction, or a defined damages mechanism — rather than leaving the remedy to be argued about after the fact.
- An independent impact study option. In more sophisticated negotiations, owners can seek the right to commission an independent study assessing the likely impact of a proposed new development on the subject hotel’s performance, providing an evidence-based basis for objecting to a marginal case rather than relying purely on the letter of the clause.
A Clause Worth Reading Closely, Not Just Signing
An Area of Protection that only covers one brand, in an imprecisely mapped area, for a fraction of the agreement’s actual term, offers considerably less real protection than its name suggests. Given how central this clause is to an owner’s underlying investment case — and how much operators have quietly narrowed its practical effect as their brand portfolios have grown — it deserves the same detailed, sceptical negotiation as the financial terms of the agreement, not the lighter treatment it often receives as a seemingly standard, boilerplate provision.
Tim Dobson is the Founding and Managing Partner of Dobson & Partners, a boutique international law firm based in Bangkok, and is ranked by Chambers Asia-Pacific for his hospitality and hotels practice. He has acted for hotel owners across Thailand, Vietnam, Cambodia, Bangladesh and the Maldives in the negotiation of hotel management agreements against most of the world’s major international hotel operators.