An agency theory perspective on the owner/manager relationship in tourism-based condominiums

Abstract

This paper draws on field study data to provide an examination of the condominium owner/manager relationship in the Australian tourism context. Although there has been considerable growth in tourism accommodation owned through strata-title, no research examining the somewhat idiosyncratic relationship between unit owners and resident managers has been found in the literature. The peculiar nature of the relationship underlines its significance as a context in which to apply the agency theoretical model. As Australian condominium resident unit managers provide letting and caretaker services for condominium unit owners, it appears that the relationship can be justifiably viewed as a principal-agent exchange (Mills, P.K., J. Business Res. 20 (1990) 31). The study specifically focuses on strata title condominiums located in major tourism regions. This sub-sector of the condominium management industry was chosen for study because it exhibits several key attributes distinguishing it from the non-tourist-based condominium sector. For example, two different parties represent the principal (resident owners and investor owners), also a significant proportion of a resident manager's work relates to the management of short-term holiday unit letting. In light of the particular agency relationship dynamics arising in large tourist-based condominium governance, several suggestions concerning the legal environment of the industry are provided.