Hotel Law: Emerging Issues for the Hospitality Industry
By Nelson Migdal Shareholder & Co-Chair Hospitality Practice, Greenberg Traurig LLP | May 11, 2010
The hospitality industry as a whole, and various sectors within the industry in particular, continue to face challenges arising from changes in the local, regional, national and international marketplace. We will identify and briefly discuss some of these emerging issues.
The Hotel Management Agreement
The hotel management agreement is the primary document governing the relationship between the hotel owner and the hotel operator or manager. Even in the franchise arena there are often hotel management agreements that govern the management of the hotel for the owner. In this case the management agreement gives the owner a bit more flexibility by allowing the owner to add its own structure on top of the structure provided in the franchise agreement. Therefore, the hotel would be managed in accordance with both the management agreement and the franchise agreement. Because the management agreement is the vehicle for so much of what governs the parties, the agreement itself becomes important in considering emerging legal issues.
Which Party is the Employer of the Hotel Employees?
One of the big issues for hotel owners is which party is the employer - the owner or the manager? There are pros and cons to each scenario, and the terms and conditions of the hotel management agreement with respect to employees and employment matters must be well thought out and leave no room for error. Because so many owners these days are REITS, private funds, insurance companies, and other institutional owners, the entire employee and employer relationship must be closely examined. Surprisingly, economics do not play into this issue as much as one would think. Typically, the owner is responsible for the costs of employment as an operating expense of the hotel regardless of which party is the employer. Similarly, the issues of imputation of liability for the conduct of certain employees are often the same regardless of which party is the employer. What tips the scale will vary based upon many factors, and the applicable law of the jurisdiction in which the hotel is located.
Performance Test Termination