What Is the Difference between a Gms and Pms Contract

When it comes to the contracts that hotels offer their clients, it can be confusing to differentiate between the different types available. Two common terms you may come across are GMS and PMS contracts. While they may sound similar, there are distinct differences between these two types of agreements.

First off, let`s define what GMS and PMS stand for. GMS stands for Guaranteed Maximum Price contracts, while PMS stands for Professional Management Services contracts.

A GMS contract is a type of construction contract where the contractor and the owner agree on a maximum price for the project before work begins. This means that the contractor is responsible for completing the work within that price, even if unforeseen circumstances arise that could increase the cost of the project. As a result, GMS contracts provide the owner with cost certainty upfront and can be advantageous for projects that have a fixed budget.

On the other hand, PMS contracts are typically used in the hospitality industry, specifically for hotels and resorts. The purpose of a PMS contract is to have a third-party management company handle the day-to-day operations of the hotel. This includes everything from overseeing staff to handling bookings and reservations. PMS contracts are advantageous for hotel owners who may not have the time or expertise to manage their property themselves. By outsourcing management responsibilities, owners can focus on other aspects of their business and leave the operational details to professionals.

While GMS and PMS contracts may seem unrelated, there is one significant similarity between the two. Both types of contracts require detailed specifications and clearly defined roles and responsibilities from all parties involved. This helps to avoid misunderstandings or disputes down the line, and ensures that the project or hotel runs smoothly.

In summary, GMS contracts are used in construction to provide cost certainty upfront and protect the owner from unforeseen costs, while PMS contracts are used in hospitality to outsource operational responsibilities to a professional management company. Understanding the differences between these two types of contracts can help you make informed decisions when choosing the right contract for your business needs.