Contracts between hotel owners and hotel management companies determin

Question

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.

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 
 1. The primary purpose of the passage is to

A. 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 
 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 
 3. According to the passage, some management companies have taken equity stakes in their properties in order to

A. 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 
 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 
 5. It can be inferred from the passage that the agreements typically entered into by management and owners

A. 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 
 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 EXCEPT

A. 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 
 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

SomeOneUnique · Answer

According to the best of my ability, kindly find the answer explanations below.

1. The primary purpose of the passage is to

A. redress certain wrongs perpetrated by owners of hotels => wrongs are mentioned only in second para so this choice does not give the primary purpose.  INCORRECT 
B. stress the need for fiscal responsibility in the hotel industry => responsibility is already taken by management companies  INCORRECT 
C. analyze a situation and point out its broader implications => passage is written to analyze how owners and management work together and its implications.  CORRECT 
D. present one type of contract used in the hotel industry => No contract is presented in the passage.  INCORRECT 
E. point out the dangers of mismanaging hotels => In the second para mismanagement is mentioned but dangers are not pointed out. Also it is only in second para but not primary purpose.  INCORRECT

2. According to the passage, how have some owners attempted to rectify problems with management?

EXPLANATION: Para 2 line 2 "This reconfiguration has been furthered by legal suits brought by owners attempting to redress mismanagement."  
A. They have decreased their total level of investment. => With the support of para 1 last line, we can say owners began to lobby for fee reductions and company's performance based shorter contracts but it was due to troubled economy not to rectify the management problems.  INCORRECT 
B. They have offered management companies changes in their contracts that would benefit both parties. => Due to troubled economy, changes in management contracts were made but these were performance based not beneficial fr both parties.  INCORRECT 
C. They have focused attention on the poor hiring practices of management companies. => Passage never talked about hiring management practices.  INCORRECT 
D. They have sought restitution in court. => Perfect, that was a direct question - in line with the explanation  CORRECT 
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 to

EXPLANATION: Para 2 line 1 and line 2 - management companies have taken equity stakes for - balance of responsibility and control   
A. create stronger alliances with hotel property owners => That move will not create alliance with owners because owners are not happy when they lose control.  INCORRECT 
B. prevent owners from tying fees to performance => Who knows if steps taken by owners are still valid because they have taken matter to court.  INCORRECT 
C. install a system of checks and balances in the industry => No system is installed  INCORRECT 
D. maintain control over daily operations => Perfect, that was a direct question - in line with the explanation  CORRECT 
E. gain a foothold in a troubled economy => to deal with troubled economy, owners took steps mentioned in para 1 last line but companies did not take steps because of troubled economy.  INCORRECT

4. According to the passage, what was the reaction of owners to a decline in the value of their hotels?

EXPLANATION: Para 1 last line - Owners began to lobby for fee reductions and shorter contracts with management companies, sometimes linking the fee schedules to a management company's performance.  
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. => Perfect, that was a direct question - in line with the explanation  CORRECT 
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 owners

A. worked as long as the owners did not get too greedy => Owners were never greedy. Every time owners made changes as a response to something.  INCORRECT 
B. were to the benefit of both parties throughout the 1970s => Year is not given in the passage.  INCORRECT 
C. had problems that were not immediately evident => Para 1 last line mentions the problems which were encountered during troubled US economy. Hence we can say these problems were not evident until a certain situation happened.  CORRECT 
D. were ideal for those owners with a hands-on approach to business => We can infer anything about types of owners  INCORRECT 
E. favored management in most situations => The agreements had fairly divided duties.  INCORRECT

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 EXCEPT

EXPLANATION: Prior to changes duties were divided. Para 1 line 3. "the owner provides financing, and the management company furnishes its expertise in the running of the hotels, providing publicity campaigns and established name recognition."  
A. 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 => financing does not come under management duty thus this is an exception.  CORRECT

7. According to the passage, what caused a change in the way management and owners work together to run a hotel?

EXPLANATION: Para 1 line 3 and 4 say it was only when the United States economy entered a troubled stage, problems became more readily apparent. Alarmed by their faltering properties, owners made changes.  
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 => Perfect, that was a direct question - in line with the explanation  CORRECT 
E. A new program that tied fees to management performance

c93liu · Answer

Q1 - my answer is C)

A) - "perpetrated by owners of hotel" seems wrong. If anything the stress and changes between owners and operators are mainly stemming from the inherent issues (the classic agency problem).
B) - Again, the main issue is the agency problem (principal-agent problem), not fiscal responsibility.
C) - Yes. The situation analyzed here is the restructuring of owner-manager contracts / relationships in the hotel industry, and the broader implication is the last sentence of the passage.
D) - This point is not discussed or at any rate too narrow of a focus.
E) - Again, not discussed at all or too narrow of a focus.

Q2 - my answer is D)

A) - Not discussed at all in the passage.
B) - "benefit both parties"? More like to the detriment of the management companies.
C) - Not discussed at all in the passage.
D) - Yes. In paragraph 2: "This reconfiguration of the balance of responsibility and control has been furthered by legal suits brought by owners...".
E) - Not discussed at all in the passage.

Q3 - my answer is A)

1st sentence in paragraph 2 directly answers this question: "Some management companies have sought to align themselves even further with the owners and have taken equity stakes in their properties."

A) - Yes. See above.
B) - It's for more interest alignment, and not fee-for-performance.
C) - Nope, not for checks and balances.
D) - They are already in control of daily operations.
E) - Not discussed in the passage.

Q4 - my answer is D)

Last sentence in paragraph 1 directly answers this questions: "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." So they did 3 things: 1) fee reduction, 2) shorter contracts, 3) in some cases, fee-for-performance.

A) - This goes against 2) above.
B) - This could be related to obtaining equity stake as discussed in the 1st sentence of paragraph 2, but this is not something that owners did, but what the management companies did.
C) - Nope, not discussed in the passage.
D) - Yes. See 2) above.
E) - "withheld" is not discussed.

Q5 - my answer is C)

A) - We only know that the contracts became a focal point during the economic downturn, which exposed inherent issues in these contracts. We do not know whether they worked before that and as long as the owners were not greedy.
B) - Don't know where 1970s come from.
C) - Yes. And these inherent problems became evident during the economic downturn.
D) - Not discussed in the passage.
E) - We do not know this from the passage.

Q6 - my answer is E)

From paragraph 1: "Simply stated, the owner provides financing, and the management company ... furnishes its expertise in the running of the hotels, as well as providing publicity campaigns and established name recognition".

A) - Ad campaign sounds like publicity campaigns mentioned above. So A) is out.
B) - While an accounting convention could be really far off the hotel core territory, it could be for the benefit of establishing name brand recognition (think about all the sponsors to an industry event). B) is out.
C) - This sounds like day-to-day management on staffing, so C) is out.
D) - Again, for publicity and to establish name brand recognition, so D) is out.
E) - Yes. The only thing that the management does not do is to provide financing.

Q7 - my answer is D)

We know that the change is caused by the economic downturn - "It was only when the United States economy entered a troubled stage that the problems inherent in this structure became more readily apparent" in paragraph 1 - and only D) speaks to that.

800gal · Answer

ANSWERS 1. C 2. D 3. A 4. D 5. C 6. E 7. D

REASONING -

Contracts b/w owners & management determine admin of hotel chains.

Owners —> $$$ responsibility
Management —> Marketing, Staffing, day to day ops, provides expertise in running chains, publicity campaigns, name recognition.

(Implies things were ok till this point in history) US economy got troubled —> inherent problems got more apparent in this structure

Owners got alarmed by their faltering properties —> led to owners lobbying for short contracts + fee reductions —> linking fee schedules w/ m.company’s performance (payments started to depend on performance)

Main Point Paragraph 1 —> Introduces a type of contract, defines the contract + it’s properties, explains when it started to breakdown and consequences

m.company aligning with owners by taking equity (ownership) in owner’s properties. (reconfiguration of responsibility- control balance)

The reconfiguration became furthered (more reconfiguration has occurred) when owners filed legal suits (attempt to redress (change) a gross mismanagement (acc to them))\

The attention on lawsuits—> should stand as firm reminder to owners of assets (all kinds) to maintain SOME control on their assets. (AUTHOR’s viewpoint/ statement)

Main Point Paragraph 2 —> Further consequences of the contract falling apart and what each party did in response.

Main Point Passage —> Explains a type of contract with flaws that became apparent during the US economy trouble and it’s consequences.

Author’s Tone —> Analytical w/ a personal viewpoint at the end.

1. The primary purpose of the passage is to

Primary Purpose questions can be helped with a passage map. The passage clearly introduces a contract in the hotel industry, how it went wrong and it's consequences.

A. redress certain wrongs perpetrated by owners of hotels  
The passage doesn't address any wrongs by OWNERS of the hotels. In fact it only addresses how the contract between owners and management broke down after the U.S economy trouble. This is incorrect.
  B. stress the need for fiscal responsibility in the hotel industry   
Fiscal responsibility isn't stressed by the author or anywhere in the paragraph. The paragraph is simply an analysis of a situation in the industry, not necessarily a piece on how to deal with any problems.
 C. analyze a situation and point out its broader implications
CORRECT.  This choice correctly states the primary purpose of the paragraph, which is analysis of the contract, it's breakdown and it's implications.
  D. present one type of contract used in the hotel industry  
This is the purpose of the first few sentences of the FIRST paragraph, not the purpose of the WHOLE passage.
  E. point out the dangers of mismanaging hotels  
This choice implies that the passage warns of something. The entire tone of the passage is analytical. The only warning is the statement at the end of the passage, however this does not make it the primary purpose.

2. According to the passage, how have some owners attempted to rectify problems with management?

This is an evidence question. All we need to do is find evidence on how the owners attempted to rectify problems with management. In the passage it is stated how the owners started to lobby for fee reductions, shorter contracts and filed legal suits as a reaction to their faltering properties.

A. They have decreased their total level of investment.  
Owners reducing their own total money investment is not mentioned in the passage. Asking for fee reductions is not a reduction in investment per say.
  B. They have offered management companies changes in their contracts that would benefit both parties.  
Owners asked for shorter contracts + fee reductions, however we do not know whether this would benefit BOTH parties. There is not enough evidence in the passage for this statement.
  C. They have focused attention on the poor hiring practices of management companies.  
It is not stated in the passage that the hiring practices of management companies was either POOR or the PRIMARY PROBLEM the owners had. Not enough evidence for this choice.
  D. They have sought restitution in court.
CORRECT.   Owners did in fact file legal suits in COURT. Clear evidence in the passage.
  E. They have recognized the problems inherent in a troubled economy.  
All we know about the troubled economy is that the problems INHERENT WITHOUT THE TROUBLED ECONOMY between owners and management became more apparent AFTER the economy fell into trouble. This choice uses the words troubled, economy and inherent temptingly, however the meaning is distorted from what the passage states. TRAP CHOICE.

3. According to the passage, some management companies have taken equity stakes in their properties in order to

Another Evidence Question. The passage states that the management companies took equity stakes in properties TO align themselves with the owners.

A. create stronger alliances with hotel property owners
CORRECT.   To align is to create alliances. This choice perfectly parallels what is stated in the passage.
  B. prevent owners from tying fees to performance  
Not enough evidence for this choice in the passage. This isn't mentioned or even implied in the passage. All we know is that the management taking equity stakes was done to align themselves with the owners.
  C. install a system of checks and balances in the industry  
Same reasoning as B. Not enough evidence for this choice in the passage. This isn't mentioned or even implied in the passage. All we know is that the management taking equity stakes was done to align themselves with the owners.
  D. maintain control over daily operations  
We already know that management companies already have control over daily operations as it is. It seems illogical for them to take equity stakes to keep doing what they can already do.
  E. gain a foothold in a troubled economy  
Not enough evidence for this choice. It isn't mentioned that the management took equity for some sort of financial benefit in the troubled economy.

4. According to the passage, what was the reaction of owners to a decline in the value of their hotels?

Evidence question--> The passage states in paragraph 1 that the owners became alarmed at their faltering properties and as a result did the following things--> lobbied for fee reductions, shorter contracts, interconnected fee schedules with the performance of management and filed lawsuits.

A. They negotiated with management companies for longer contracts in exchange for smaller fees.  
The owners lobbied for FEE REDUCTIONS and SHORTER CONTRACTS. This choice is wrong for 2 reasons --> longer contracts is incorrect, and longer contracts weren't negotiated IN EXCHANGE for smaller fees.
  B. They attempted to align themselves financially with management.  
Not enough evidence for this choice. Owners never tried to align themselves financially with the management ( The only alignment mentioned is by the management taking equity in property to align themselves with owners.)
  C. They took over the daily operations of their hotels.  
This is beyond the scope of the passage. It isn't mentioned whether control of operations was given to/taken by owners.
  D. They tried to shorten their contracts with management.
CORRECT.   The owners did lobby for shorter contracts as per paragraph 1.
  E. They withheld fees from management in exchange for more control over their properties.  
The only change in fees mentioned is lobbying for fee reductions and connecting fee schedules to management performance. Withholding of fees in exchange for control is not mentioned and hence beyond the scope of the passage.

5. It can be inferred from the passage that the agreements typically entered into by management and owners

CR + RC --> Inference --> Given what is written in the passage, the answer choice MUST BE TRUE. Therefore, answers to look out for are MAY BE TRUE choices and FALSE choices.

A. worked as long as the owners did not get too greedy  
Greed on the part of the owners is not mentioned as a factor of the agreement. FALSE.
  B. were to the benefit of both parties throughout the 1970s  
Don't be fooled by this choice, all we know is that the US economy became troubled at SOME TIME (Not necessarily AFTER the 1970s). MAY BE TRUE.
  C. had problems that were not immediately evident
CORRECT.   It clearly states in the passage that this contract had inherent problems that became MORE APPARENT after the US economy trouble. TRUE
  D. were ideal for those owners with a hands-on approach to business  
Beyond the scope of the passage. How the contract was ideal was owners with a hands on approach is not explored or even hinted at in the passage. FALSE
  E. favored management in most situations  
All we know is that the contract has problems the resulted in owners reacting a certain way to management. It is even mentioned in the last paragraph that ".....legal suits brought by owners attempting to redress  what they say  has been gross mismanagement." The owners did feel that they lost more in this arrangement, however it is stated as a relative viewpoint of the owners, not as an absolute fact.

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 EXCEPT

Inference  EXCEPT  questions are dangerous. Look for 4 MUST BE TRUE CHOICES. The correct choice MAY BE TRUE or COMPLETELY FALSE.
We know from the passage that management companies performed the following functions --> Marketing, Staffing, other day to day operations, provide expertise in running chains, publicity campaigns, providing established name recognition.
Owners only provided financial backing and managed finances in general.

s]A. devising an advertising campaign  
This can fall under day to day operations + publicity campaigns. TRUE
  B. booking a national accounting convention  
This can fall under day to day operations. TRUE
  C. contacting a temporary employment agency  
This can fall under the task of STAFFING. TRUE
  D. hiring celebrities for promotional appearances  
This can fall under publicity campaigns. TRUE
  E. providing financing for expanding facilities
CORRECT    Finances are handled by the owners not management. This is FALSE.

7. According to the passage, what caused a change in the way management and owners work together to run a hotel?

We need to find evidence for what/what event started the change in the way the two parties worked together. From the passage map we know that the troubles became more apparent after the US ECONOMY BECAME TROUBLED.

A. A lack of trust on the part of owners in the capabilities of management  
This cannot be backed by the passage as it does not mention lack of trust as a reason for why the working together changed or that lack of trust CAUSED the change.
  B. A reconfiguration in the balance of responsibility between the two parties  
The reconfiguration is clearly mentioned as an EFFECT of the change in the way the two parties worked together and not the CAUSE.
  C. A demand by owners for a bigger role in daily operations  
The owners are never mentioned as demanding a bigger role in daily operations. This is outright wrong.
  D. A downward trend in the economy in general
CORRECT.    This choice may seem a bit generalised, however it is clearly stated that the changes started with the US economy troubles.
  E. A new program that tied fees to management performance  
Same reasoning as B. The tying of fees to management performance is an EFFECT of the change in the way the two parties worked and NOT THE CAUSE.

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Contracts between hotel owners and hotel management companies determin

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Contracts between hotel owners and hotel management companies determin

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