Incentive Fee

What is the meaning / definition of Incentive Fee in the hospitality industry?

The term Incentive Fee is used to describe a fee that incurs to an investor when his/her fund manager is able to establish returns, above a suggested benchmark initially established. Incentive Fees are set to encourage fund managers to strive for higher returns. While higher returns may be one positive aspect incurring from the Incentive Fee, the fee also encourages rather risky investments. The issue here is that often the fund managers are not held responsible for the losses, only for the gains. This may therefore lead to investments which arenโ€™t fully in line with the investors best interests.

Synonyms:

  • Performance Fee

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About the Author:

As CEO and Founder of XOTELS, Patrick Landman has made it his mission to turn hotels and resorts into local market leaders. XOTELSยด diverse expertise and deep-knowledge across revenue management consulting, hotel management, and hotel consulting, enables us to drive results for independent boutique hotels, luxury resorts, and innovative lodging concepts. Below you will find opinion articles written by Patrick Landman.