News for the Hospitality Executive |
Litigation and Disputes Between Hotel Owners
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. 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 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 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 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 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. Ritz-Carlton
Bali hotel management agreement termination further court order 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 [email protected] 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
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