Let’s start here: revenue sharing isn’t a bad thing. Structured thoughtfully, it can be one of the better ways to align the interests of a property owner and their operator. Both parties benefit when the property performs, both have a reason to grow revenue, and ideally everyone is working toward the same outcome. Sounds pretty good, right? It can be. But there’s a difference between sharing revenue and sharing priorities, and that’s where things can get complicated.
More revenue doesn’t always mean more money
Imagine your operator comes to you with great news. Revenue is up 12%, occupancy is climbing, the property is outperforming last year, and everyone’s celebrating. But your distributions haven’t moved much. Maybe they’ve even gone down. How? Because revenue is only one part of the equation. Perhaps the extra bookings came through higher-commission channels. Maybe the average daily rate dropped to drive occupancy, or labor, maintenance and guest recovery costs went up along the way. None of those decisions is inherently wrong, and sometimes they’re exactly right. But they should be judged against the financial performance of the asset, not just the revenue it brings in. A full building isn’t necessarily a profitable one, and a growing top line doesn’t automatically lead to a healthier bottom line. That’s not an argument against revenue sharing. It’s an argument for understanding what you’re sharing.
The percentage is the easy part
Owners understandably spend a lot of time negotiating the percentage. Is 15% reasonable? What about 20%? What about a base fee plus a performance incentive? Those are fair questions, but we’d argue another one deserves just as much attention: a percentage of what, exactly? Gross booking revenue? Accommodation revenue? Revenue after discounts and refunds? Are cleaning fees included? What about ancillary income? Who absorbs distribution costs, and where do those expenses show up? Two agreements with the same headline percentage can produce very different results. And the definition of revenue is only the beginning. What expenses can the operator approve on their own? Which costs are passed through to ownership? Are there spending thresholds? What happens when the property needs a capital investment? The point isn’t to turn every management agreement into a fight. It’s to make sure both parties understand the economics before those economics become a source of frustration.
Alignment doesn’t happen just because you signed an agreement
One of the more appealing arguments for revenue sharing is that it aligns incentives, and to a degree it does. An operator who earns more when revenue grows has a clear reason to bring in bookings. But owners and operators can define success differently. An operator may focus on occupancy, portfolio growth, market share, guest satisfaction and revenue performance. An owner may focus on cash flow, asset preservation, debt obligations, capital expenditures and long-term property value. Those goals aren’t mutually exclusive. They just aren’t automatically the same. Take a decision to discount rates aggressively during a slow period. It might bring in more revenue and lift occupancy. It could also attract a different kind of guest, add wear and tear, or create operating costs that outweigh the benefit to ownership. Maybe it’s still the right call, but someone should be asking whether it is. Good alignment isn’t just about how the money is divided. It’s about how decisions get made.
Your operator can be good at their job and still need oversight
This is an important distinction. We’re not suggesting owners should distrust their operators. Quite the opposite. We’ve spent our careers in hospitality operations. We know what it takes to run properties, manage teams, meet guest expectations and make decisions when there isn’t a perfect answer. We also know how easily an operation gets consumed by what’s right in front of it: the guest arriving tonight, the maintenance issue that can’t wait, the staffing shortage, the revenue target, the next property coming online. An operator can be competent, committed and genuinely invested in your property’s success and still have blind spots. That’s why independent oversight matters. It isn’t because someone needs to catch the operator doing something wrong. It’s because sometimes the most valuable person in the room is the one who doesn’t have to defend the decisions already made.
Five questions we’d ask before signing
If an owner came to us with a proposed revenue-sharing agreement, we’d start with a few questions.
1. How is revenue defined, and what costs sit outside that definition?
We’d want to know exactly how the fee is calculated and how the arrangement affects the owner’s actual returns.
2. Who controls the decisions that affect profitability?
Pricing, distribution strategy, staffing, vendor relationships, maintenance spending and guest compensation can all hit the bottom line.
3. What does successful performance actually look like?
Not just revenue growth. We’d want to understand the property’s financial goals, comparable performance, expense structure and the owner’s expectations.
4. What information will ownership receive?
A monthly revenue report is useful. A clear picture of revenue, expenses, operating performance and cash flow is considerably more useful.
5. What happens if the relationship stops working?
How is performance reviewed? When can terms be revisited? What are the transition requirements if either side wants to move on?
None of these are necessarily reasons to walk away from an agreement. They’re reasons to go into it with your eyes open.
You don’t have to become a hospitality operator to own a hospitality asset
Here’s something we think gets overlooked. Many property owners aren’t interested in running hospitality businesses, and they shouldn’t have to be. That’s often the whole reason they hired an operator. But outsourcing operations shouldn’t mean outsourcing your understanding of the business. You should be able to ask meaningful questions, evaluate performance and make informed decisions about your investment without becoming an expert in revenue management, housekeeping productivity, distribution channels or property management technology. That’s where an independent perspective can make a difference: someone who understands how operators think, how hospitality businesses work, and where financial and operational performance can drift apart. Someone who can look at the numbers, ask the uncomfortable questions, and help tell the difference between a real operating challenge and a chance to do something differently. And, importantly, someone who can work alongside your current operator instead of immediately suggesting you need a new one. Sometimes the answer isn’t changing the relationship. It’s making the relationship work better.
So, should you agree to revenue sharing?
Maybe. It might be exactly the right structure for your property, your operator and your financial goals, or it might need a few adjustments. What we wouldn’t recommend is deciding based only on a percentage, a revenue projection, or the promise that everyone’s interests will naturally line up. The best owner-operator relationships are built on more than a compensation structure. They’re built on transparency, accountability, clear expectations and a shared understanding of what success actually means. Revenue sharing can be a great starting point. It shouldn’t be the whole conversation.
Your Operator Has a Team Looking After Their Business. Who's Looking After Yours?
At Found Better, we help hospitality property owners evaluate operator relationships, understand financial and operational performance, and make more informed decisions about their assets.
From reviewing proposed management structures to assessing existing operations and identifying opportunities for improvement, we bring real hospitality operating experience to the owner's side of the table.
We're not here to create conflict between owners and operators.
We're here to help both sides build relationships that actually work.
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