Hotel Online
News for the Hospitality Executive


advertisement


Litigation and Disputes Between Hotel Owners
and Operators are on the Rise? Why?


By Jim Butler of the Global Hospitality Group®
Author of www.HotelLawBlog.com
January 16, 2012

Hotel Lawyer: Hotel Management Agreement litigation and controversies are on the rise.

I was recently interviewed by Jason Freed of HotelNewsNow (a division of Smith Travel Research) for his article, Economic woes drive owner-operator disputes and it got me thinking.

Hotel lawyers will tell you that there are always disputes going on between hotel owners and operators, and that most of them are resolved at the bargaining table without any legal action.


Some disputes advance into litigation with the filing of a complaint, and others go to arbitration. The choice between litigation and arbitration is normally determined by the terms of the management agreement. Operators seem to prefer arbitration and they have pushed to create a trend to arbitrate. The arbitrations are "private" and tend to be missed by the press and are conducted in secrecy.


But the number of owner-operator battles has really escalated over the past few years. This is not just a matter of these disputes getting more media attention. There are a lot more disputes. What you see in the press is just the tip of the iceberg.

The root cause of owner-operator disputes

While each dispute has a specific cause or issue, at the heart of the matter you will find the belief that the operator is not operating the hotel in a satisfactory manner and is treating the owner unfairly.

Operators don't want to give up their lucrative management agreements and many of them can't or won't change their actions to satisfy owners who bear all the financial risk of the hotel investment. In times like these, owners may find themselves dipping heavily into other funds to meet negative operating cash flows or mortgage payments. Many face foreclosure -- and loss of their entire investment -- with the operator's sub-par performance. They feel cheated when operators continue to take all their money "off the top" (from gross revenues) and the operators won't cooperate to improve the situation.

The role of the economy

Clearly, bad economic times create a lot more friction between hotel owners and operators. When everyone is making lots of money, most people don't feel desperate to correct every wrong. When hotel operations hit the skids, and owners have to write checks to keep the doors open, they want fast and responsive cooperation on critical issues.

Our current economic "recovery" is one of the slowest in history. Recovery in the hotel industry has been very uneven depending on the hotel's location, property type, market and other factors. Where hotels are performing better, friction between hotel owners and operators tends to ease. But for many, the improvement is neither big enough nor fast enough to quell the owner's dissatisfaction over operator shortcomings. As a result, we see the trend of hotel management agreement disputes continuing and increasing for quite a while.

Operator as fiduciary

Some owner-operator lawsuits pivot on the fiduciary responsibility of the operator. This is an important legal concept for hotel owners to grasp. Jason Freed's article included a sidebar I wrote on this very topic and I will share it with you in my next blog post.

You will find a lot more valuable information related to this topic on the Hotel Law Blog under the topic "Hotel Management and Franchise agreements", including a classic article on the 5 biggest mistakes a hotel owner can make.

Also see The HMA Handbook: Hotel Management Agreements for Owners, Developers, Investors and Lenders.

Articles on Hotel Law Blog about terminating hotel management agreements

Terminating hotel operators: M Edition lawsuit against Marriott has a new twist -- Marriott is replaced overnight

More on M Waikiki Edition lawsuit against Marriott - What Marriott's General Counsel says

M Waikiki's Edition lawsuit against Marriott and Ian Schrager - an owner's HMA dispute with Marriott

Terminating hotel operators: Turnberry Resort drops Fairmont flag

Hotel management agreement terminations -- Is there a better way?

Terminating hotel management agreements when things don't work? Not easy, but not impossible either.

Hotel bankruptcy trump card. Terminating hotel management agreements without liability -- the alchemy of lead to gold for troubled hotels and hotel loans?

Ritz-Carlton Bali hotel management agreement termination further court order

Ritz-Carlton breached contractual and fiduciary duties under hotel management agreement giving rise to free termination, $10.3 million in damages plus attorneys fees. When will hotel operators "get it"?

How to terminate a hotel management agreement when an operator really deserves it!

________________________

This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. We've done more than $60 billion of hotel transactions and have developed innovative solutions to help investors be successful in bidding for hotel acquisitions, and helping investors and lenders to unlock value from troubled hotel transactions. Who's your hotel lawyer?

________________________


Our Perspective. We represent hotel lenders, owners and investors. We have helped our clients find business and legal solutions for more than $60 billion of hotel transactions, involving more than 1,300 properties all over the world. For more information, please contact Jim Butler at jbutler@jmbm.com or +1 (310) 201-3526.

Jim Butler is a founding partner of JMBM, and Chairman of its Global Hospitality Group® and Chinese Investment Group™. Jim is one of the top hospitality attorneys in the world. GOOGLE "hotel lawyer" and you will see why.

Jim and his team are more than "just" great hotel lawyers. They are also hospitality consultants and business advisors. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them.



JMBM’s Global Hospitality Group®
The hotel lawyers in the Global Hospitality Group® of Jeffer Mangels Butler & Mitchell (JMBM) comprise the premier hospitality practice in a full-service law firm and are the authors of the Hotel Law Blog. We represent hotel owners, developers, investors and lenders and have helped our clients find business and legal solutions for more than $60 billion of hotel transactions, involving more than 1,000 properties worldwide. For more information about the Global Hospitality Group®, go to www.HotelLawBlog.com. For more information about full range of legal services provided by JMBM, go to www.JMBM.com.
.
Contact: 

Jim Butler
jbutler@jmbm.com
310.201.3526

 

.
Receive Your Hospitality Industry Headlines via Email for Free! Subscribe Here  

To Learn More About Your News Being Published on Hotel-Online Inquire Here
 
Also See: ADA Defense Lawyer: New ADA Regulations Kick in Soon. Say goodbye to 'grandfathering' under the ADA / Jim Butler / November 2011

Hotel Lawyer in Washington D.C. - Why the Lodging Industry Will Continue to Do Well Despite Bumpy Markets and More / Jim Butler / November 2011

Chinese Investment in U.S. Hotels: What the Real Estate Professionals Want to Know / Jim Butler / October 2011

Hotel Lawyer in Dallas Listening to the Special Servicers / Jim Butler / October 2011

Hotel Lawyer with Optimism for the Hotel Industry from the Dallas Lenders Conference, Fishing for Solutions 2011 / Jim Butler / October 2011

Updating Service Animal Policies of Your Hotel or Other 'Place of Lodging' / Jim Butler, Martin Orlick and David Sudeck / October 2011

Hotel Industry Alert: Some things to feel (very) good about! / Jim Butler / September 2011

Hotel Lawyers in Phoenix: It's not just me. The market has changed in just the last 60 days! / Jim Butler / September 2011

Hotel Labor and Employment Lawyer Update: Controversial Union Rights Notice Subject to Legal Challenge - Employers Should Not Rush To Post It / Jim Butler & Scott Brink / September 2011

Hotel Franchise Lawyer: Hotel Franchise Agreements and the 5 Biggest Mistakes a Hotel Owner Can Make / Jim Butler & Robert Braun / September 2011

Hotel Labor and Employment Lawyer Alert: The NLRB is making it harder to stay union free / Jim Butler & Scott Brink / September 2011

Tips from Hotel Franchise and Management Lawyers: Beware the Trap of Changing Brand Standards / Jim Butler & Robert Braun / September 2011

Labor and Employment Alert: New Law Requires Employers to Post Employee Rights Notice by November 14, 2011; NLRB Publishes Final Rule for Notification of Employee Rights / Scott Brink , JMBM / September 2011

Hotel Lending Lawyer: What every hotel lender needs to know about hotel due diligence / Jim Butler & Guy Maisnik / September 2011

Hotel Lending Lawyer: What every hotel lender needs to know about Cash Controls / Jim Butler & Guy Maisnik / August 2011

Hotel Lawyers on Terminating Hotel Operators: M Edition Lawsuit Against Marriott Has a New Twist Marriott is Replaced Overnight / Jim Butler / August 2011

Hotel Lawyers on Terminating Hotel Operators: Turnberry Resort Drops Fairmont Flag / Jim Butler / August 2011

Hotel Lending Lawyer: What every hotel lender needs to know about SNDA's / Jim Butler & Guy Maisnik / August 2011

Hotel Lending Lawyer: What every hotel lender needs to know about HMAs and hotel franchise agreements / Jim Butler & Guy Maisnik / August 2011

Hotel Lawyer on the Importance of Brands - Intellectual Property Rights and What They Mean: Family Suites Resorts v. Viacom International d/b/a MTV Networks - a Suit Over Branding / Jim Butler / August 2011

Hotel Lawyer on the Fiduciary, Contractual and Agency Duties of Hotel Brokers - Host Hotels & Resorts LP v. Molinaro Koger Litigation / Jim Butler / August 2011

M Waikiki's Edition Lawsuit Against Marriott International and Ian Schrager - an Owner's HMA Dispute with Marriott and What it All Means / Jim Butler / August 2011

Hotel Investment: Why Asian investors are targeting U.S. hotels for purchase and investment, and what could it mean for you? / Jim Butler / August 2011

Hotel Developers: Why a "regional center" may be the key to financing your next hotel development or expansion. And what you need to know... / Jim Butler / July 2011

How to use the EB-5 Immigrant Investor Visa Program for financing / Jim Butler / July 2011

JMBM Announces Formation of the Chinese Investment Group™ - Hotels, Real Estate, EB-5 Immigrant Investor Visas / July 2011

Hotel Lawyer: How do you know when you should set up a captive insurance company for your hotel? Take our "litmus test". / Jim Butler & Gordon Schaller / July 2011

Hotel Lawyer: What you need to know about the "ancillary benefits" of setting up a captive insurance company / Jim Butler & Gordon Schaller / June 2011

Hotel Lawyer: Are you thinking about setting up a captive insurance company? Maybe you should be. . . / Jim Butler & Gordon Schaller / June 2011

Hotel Lawyer in New York with pre-NYU industry forecast: Sunny with occasional clouds and NO storms on the horizon / Jim Butler / June 2011

Hotel Lawyer with the Executive Roundtable Results; Debt is returning, equity is out looking, and we've passed the bottom of the trough. Why now is the time to purchase a hotel. / Jim Butler / June 2011

ADA Defense Lawyer: How to Quickly Lose Business. (No ADA-Compliant Reservation System) / Jim Butler & David Sudeck / May 2011

Hotel Lawyer with Fresh Perspectives on the Hotel Industry from Smith Travel / Jim Butler / May 2011

Hospitality Lawyers with PKF and Mark Woodworth's Lodging Overview / Jim Butler / May 2011

Hotel Lawyers' Updates on Capital and Debt Markets for Hotels, Transaction Sales Data and Financings / Jim Butler / May 2011

Hotel Lawyer with Updates on Hotel Cap Rates, Values and Transactions / Jim Butler / May 2011

Hotel Lawyer with nuggets from JMBM's Meet the Money® 2011 / Jim Butler / May 2011

Hotel Lawyer: The hotel transaction market is heating up! / Jim Butler / April 2011

Hotel Lawyer with good news! A new federal court decision upholds condo hotel structure. No "securities" involved as structured. Disgruntled condo hotel unit purchaser lawsuit dismissed. / Jim Butler / April 2011

Meet the Money®: Hotel Financing Renaissance is Underway! / Jim Butler / April 2011

JMBM’s Global Hospitality Group® announces publication of The HMA Handbook, a FREE practical guide for negotiating Hotel Management Agreements for Hotel Owners, Developers, Investors and Lenders / March 2011

Buying a Hotel? Don't Buy an ADA Lawsuit or DOJ Investigation / Jim Butler / March 2011

Hotel Lawyer on Hotel Management Agreements: Exculpation Clauses for Protecting the Owner's Assets / Jim Butler / February 2011

ADA Defense Lawyer: How to handle an ADA lawsuit....and How not to do it / Jim Butler / February 2011

Hotel Lawyer: 5 Key Elements for Good Hotel Management Agreement Budget Provisions / Jim Butler / February 2011

How improving fundamentals make 2011 the year of "Great Expectations" for the Hotel Industry / Jim Butler / February 2011

Ask the Hotel Lawyer: 2011 is starting as the year of "Great Expectations" for the hotel industry! / Jim Butler / January 2011

Hotel ADA Defense Lawyer: How a recent ADA case affects all hotels but particularly conference centers and meeting hotels / Jim Butler / January 2011

Hotel Lawyer: So, You Think You Want to Buy a Hotel? For savvy investors, the time could be right / Jim Butler / January 2011

Sheraton Universal Hotel Sale Facilitated by JMBM's Global Hospitality Group® / Jim Butler / January 2011



To search Hotel Online data base of News and Trends Go to Hotel.OnlineSearch

Home | Welcome| Hospitality News
| Industry Resources

Please contact Hotel.Online with your comments and suggestions.