Contracts between hotel owners and hotel management companies determine the administration of many hotel chains. Typically, owners bear the financial responsibility for profits and losses, while management companies control marketing strategies, staffing, and other day-to-day operations. Simply stated, the owner provides financing, and the management company, in some cases a management chain, furnishes its expertise in the running of the hotels, as well as providing publicity campaigns and established name recognition. It was only when the United States economy entered a troubled stage that the problems inherent in this structure became more readily apparent. Alarmed by their faltering properties, owners began to lobby for fee reductions and shorter contracts with management companies, sometimes linking the fee schedules to a management company's performance.
Some management companies have sought to align themselves even further with the owners and have taken equity stakes in their properties. This reconfiguration of the balance of responsibility and control has been furthered by legal suits brought by owners attempting to redress what they say has been gross mismanagement. The attention focused on these suits should stand as a firm reminder to owners of all types of assets to maintain some control over the handling of those assets.
1. The primary purpose of the passage is toA. redress certain wrongs perpetrated by owners of hotels
B. stress the need for fiscal responsibility in the hotel industry
C. analyze a situation and point out its broader implications
D. present one type of contract used in the hotel industry
E. point out the dangers of mismanaging hotels
2. According to the passage, how have some owners attempted to rectify problems with management?A. They have decreased their total level of investment.
B. They have offered management companies changes in their contracts that would benefit both parties.
C. They have focused attention on the poor hiring practices of management companies.
D. They have sought restitution in court.
E. They have recognized the problems inherent in a troubled economy.
3. According to the passage, some management companies have taken equity stakes in their properties in order toA. create stronger alliances with hotel property owners
B. prevent owners from tying fees to performance
C. install a system of checks and balances in the industry
D. maintain control over daily operations
E. gain a foothold in a troubled economy
4. According to the passage, what was the reaction of owners to a decline in the value of their hotels?A. They negotiated with management companies for longer contracts in exchange for smaller fees.
B. They attempted to align themselves financially with management.
C. They took over the daily operations of their hotels.
D. They tried to shorten their contracts with management.
E. They withheld fees from management in exchange for more control over their properties.
5. It can be inferred from the passage that the agreements typically entered into by management and ownersA. worked as long as the owners did not get too greedy
B. were to the benefit of both parties throughout the 1970s
C. had problems that were not immediately evident
D. were ideal for those owners with a hands-on approach to business
E. favored management in most situations
6. It can be inferred from the passage that, prior to changes in the management-owner relationship, all of the following might have been duties of management EXCEPTA. devising an advertising campaign
B. booking a national accounting convention
C. contacting a temporary employment agency
D. hiring celebrities for promotional appearances
E. providing financing for expanding facilities
7. According to the passage, what caused a change in the way management and owners work together to run a hotel?A. A lack of trust on the part of owners in the capabilities of management
B. A reconfiguration in the balance of responsibility between the two parties
C. A demand by owners for a bigger role in daily operations
D. A downward trend in the economy in general
E. A new program that tied fees to management performance