STRATEGIC ALLIANCE AGREEMENT

Exhibit 10.24

STRATEGIC ALLIANCE AGREEMENT

THIS STRATEGIC ALLIANCE AGREEMENT (“Agreement”) is made and entered into as of the 8 ^th day of September, 2006 (the “Effective Date”) by and among (i) MHI Hospitality, L.P., a Delaware limited partnership (the “Partnership”), (ii) MHI Hospitality Corporation, a Maryland corporation and the general partner of the Partnership (the “REIT”) (the REIT and the Partnership are sometimes collectively referred to herein as the “Company”), and (iii) Coakley & Williams Hotel Management Company (“Coakley Williams”), a Maryland corporation.

RECITALS

THE PARTIES ENTER THIS AGREEMENT on the basis of the following facts, understandings and intentions:

A. The REIT is a publicly traded company on the American Stock Exchange.

B. The REIT serves as general partner of the Partnership and owns a majority interest in the Partnership.

C. The Company desires to designate Coakley Williams as an approved hotel management company.

D. Coakley Williams desires to provide the Company, on a non-exclusive basis, with information regarding hotel investment opportunities that become known to Coakley Williams as set forth herein.

E. In the event Coakley Williams is selected to manage a hotel owned directly or indirectly by the Company, the Company will cause its indirect subsidiary, MHI Hospitality TRS, LLC, the lessee of such hotel (the “TRS Lessee”), to enter into a management agreement with Coakley Williams as specified below.

AGREEMENTS

NOW THEREFORE, IN CONSIDERATION of the mutual covenants and promises of the parties provided for in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

(a) The Company agrees to consider for potential acquisition, investment or development properties that are submitted to the Company by Coakley Williams and are suitable for the development or operation of a hotel. In the event Coakley Williams elects to submit a hotel or hotels to the Company, Coakley Williams agrees to promptly notify the Company, on a non-exclusive basis, of the opportunity to invest in, acquire or develop the property. Any such property shall (i) be currently managed by Coakley Williams or a subsidiary or with which

Coakley Williams currently has a substantial, ongoing business relationship (each a “Hotel Property”) and (ii) meet the Company’s acquisition criteria, as the Company may communicate such acquisition criteria to Coakley Williams from time to time. For purposes of this Agreement, a Hotel Property includes, but is not limited to, full-service upper up-scale, up-scale and mid-scale hotels (as such terms are used by Smith Travel Research or similar industry source), whether or not such hotels are underperforming in their respective marketplace, or are functionally obsolete. Coakley Williams shall promptly provide to the Company all information, materials and documents reasonably available to Coakley Williams or its subsidiaries with respect to such Hotel Property or opportunity, subject to the requirements of any confidentiality agreements with third parties, provided, however, that any confidentiality agreement must permit Coakley Williams to notify the Company of such hotel property investment, acquisition or development opportunity. Notwithstanding the foregoing, Coakley Williams shall refer any such opportunity directly to the Company prior to execution of a confidentiality agreement, but otherwise will use its best efforts, at no additional out-of-pocket expense to Coakley Williams, to negotiate any confidentiality agreement so as to permit disclosure of the opportunity, and all information, materials and documents with respect thereto, to the Company. For purposes of this Agreement, acquisition or development opportunities relating to a hotel or project that Coakley Williams or an affiliate does not manage or with which Coakley Williams does not have an existing, ongoing and substantial business relationship, shall not be deemed Hotel Properties.

(b) The Company shall notify Coakley Williams, within twenty (20) business days following the Company’s receipt from Coakley Williams of the information with respect to a Hotel Property investment, acquisition or development opportunity as described in Section 1(a), whether the Company intends to pursue such opportunity. During such twenty (20) day period, if the Company notifies Coakley Williams that the Company intends to pursue such opportunity, Coakley Williams shall not provide any information regarding such opportunity to any third party until otherwise notified by the Company, provided that the Company is making commercially reasonable efforts to conduct due diligence or is otherwise actively pursuing the investment, acquisition or development opportunity. If the Company (i) notifies Coakley Williams that the Company does not intend to pursue the opportunity, or (ii) fails to notify Coakley Williams by the end of the twenty (20) business day period that the Company intends to pursue the opportunity, then, in either event, Coakley Williams may (A) pursue the opportunity on its own behalf or (B) notify other capital sources of the opportunity.

ARTICLE II

(a) Subject to the provisions of this Article II, the Company agrees to cause TRS Lessee to offer to Coakley Williams the opportunity to manage any Hotel Property which was submitted to the Company by Coakley Williams and acquired by the Company or one of its subsidiaries and owned by the Company or leased to TRS Lessee during the Term. In the event Coakley Williams notifies the Company that it wishes to manage such Hotel Property, Coakley Williams and TRS Lessee will enter into a Management Agreement on terms and conditions mutually agreeable to the parties provided that the business terms of such agreement shall