Pillion Hotels Charting Property-Lease Course

FORT WORTH, TX— Pillion Hotels here is spearheading a move to once again bring lease agreements back into the hotel industry spotlight, inking just such an agreement with Amistad Hospitality LLC this week covering the company’s Holiday Inn Express in Del Rio, TX. Under terms of a hotel lease agreement— billed as an out-of-the-mainstream management-operations option in the U.S. but said to be considerably more routine in Europe— management companies are retained to take over development, day-to-day operations and/or marketing of the lodging property in question with a consulting or management fee covering their efforts. As explained under terms and conditions of the Pillion/Amistad pact, the owners turn all responsibility for operations and expenses over to Pillion in line with a lease agreement running between three – five years. Pillion pays owners their debt-service amount and, in some instances, an additional amount in a monthly lease payment. Payment of insurance and property tax are negotiated, and a small percentage of net operating income (NOI) is also placed into escrow each month to cover any capital improvements that may become necessary. According to this particular contractual set-up, if Pillion’s management of the property increases NOI beyond the break-even point, the management company reaps the net profit. It was further pointed out that— regardless of monthly income— owners continue to build equity and, as noted by Pillion President David Ralakis, “burrow through one of the toughest, most unpredictable times [to grip]the hotel industry.” Ralakis further maintained: “With a lease agreement, we’re saying [we will improve the bottom-line performance of that hotel]in a way that carries less risk and no additional fees for the owner.”