Common Legal Issues that Confront Hotel Operators

By Dan Brown Partner, Sheppard Mullin Richter & Hampton LLP | December 13, 2008

The ultimate responsibility and goal of a hotel manager is to achieve a profit for the hotel's owner and ensure that the hotel's guests are happy with their stay. To that end, a hotel manager acts behind the scenes at a hotel like a puppeteer with numerous day-to-day responsibilities for nearly all aspects of a hotel's operations, including, but not limited to, supervising and managing personnel, marketing, sales, security, maintenance, and food and beverage operations. In addition to attending to these numerous tasks to create a positive guest experience, a hotel manager must also be aware that managing a hotel includes the potential for the manager to be subject to a variety of legal liabilities to the hotel's guests and its owner. A thorough analysis of all of the potential legal issues that attach to a hotel's operations would require an expansive treatise that covered everything from, inter alia, common law contract, negligence, and tort claims, to federal and state securities and antitrust laws. However, the basic legal duties that apply to a hotel manager, and which have formed the basis for most of the claims asserted against hotel managers, are those that concern the hotel manager's role as an innkeeper to its guests and fiduciary to its owner.

Liabilities to Guests: The Hotel Manager As Innkeeper

The earliest explicit legal principles applicable to a hotel manager are those of the "innkeeper." Indeed, "[t]he duties of innkeepers have developed over centuries. By Chaucer's time, English law recognized the responsibilities of innkeepers to their customers. At common law, the innkeeper was required, among other things, to provide food, lodging and a safe harbor for its guests. These principles were carried across the Atlantic and, by and large, helped shape our formulations of innkeepers' duties." Darby v. Compagnie National Air France, 96 N.Y.2d 343, 347 (2001) (internal citations omitted). Today's hotel managers are still liable as innkeepers. See generally Fabend v. Rosewood Hotels & Resorts, L.L.C., 381 F.3d 152 (3d Cir. 2004) (applying an "innkeeper" analysis to a management company that operated hotel on United States Park land); Clayman v. Starwood Hotels & Resorts Worldwide, 343 F. Supp. 2d 1037 (D. Kan. 2004) (holding Starwood Hotels & Resorts Worldwide, the owner and manager of the hotel, liable under the principles stated in Restatement (Second) of Torts SS 314A).

In addition to innkeeper laws existing under the common law, many states have codified innkeeper laws into state statutes, which generally require that an innkeeper provide food and lodging to guests in a non-discriminatory manner. Moreover, while an innkeeper is not an insurer of the safety of its guests, the innkeeper laws impose a duty on a hotel manager to use reasonable care in promoting their safety. See, e.g., Shiv-Ram, Inc. v. McCaleb, 892 So. 2d 299 (Ala. 2003), as clarified on denial of reh'g, (Apr. 2, 2004) (A hotel keeper must furnish safe premises for the guest, which they may use in the ordinary and reasonable way without danger; and if any guest, while using the building where she is reasonably expected to go, is injured by a defective condition of the building, the manager is liable for the injuries to his guest that are approximately caused by his negligence in the defective condition).

These basic innkeeper principles have been tested by disgruntled hotel guests in numerous cases. For example, lawsuits asserting tort and negligence claims have been filed as a result of injuries caused by defects in guest room furnishings or other conditions, including, but not limited to, claims for injuries resulting from slips and falls, falling ceiling fans, defective chairs, faucet burns, intoxication of guests, gas stove explosions, hot water, and insects. In these cases, courts generally hold that an innkeeper owes its guests a duty of maintaining the hotel premises in a reasonably safe condition so that guests may enjoy the hotel without exposing themselves to danger. Morell v. Peekskill Ranch, Inc., 64 N.Y.2d 859, 860 (failure to warn of dangerous condition on resort walking path); DiSalvo v. Armae, Inc., 41 N.Y.2d 80, 82-83 (1985) (failure to protect children at play on resort grounds from traffic on private resort road); Orlick v. Granit Hotel & Country Club, 30 N.Y.2d 246, 249-50 (1972) (failure to properly construct and light stairways in hotel); Buchaca v. Colgate Inn, Inc., 296 N.Y. 790, 791 (1947) (failure to keep inn sidewalk free of ice); Allon v. Park Central Hotel Co., Inc., 272 N.Y. 631, 632 (1936) (failure to supervise hotel swimming pool); Clark v. New York Hotel Statler Co., Inc., 253 N.Y. 583, 584 (1930) (failure to maintain hotel's revolving door entrance); Maloney v. Hearst Hotels Corp., 274 N.Y. 106, 109 (1937) (failure to safeguard against fire inside hotel); Manahan v. N.W.A., 821 F. Supp. 1105, 1108 (D.V.I. 1991) (citing Restatement (Second) of Torts SS 314A), aff'd, 995 F.2d 218 (3d Cir. 1993) (An innkeeper owes its guests a "duty to take reasonable action to protect them against unreasonable risk of physical harm.").

Liabilities to Owners: The Woolley Case and Its Progeny

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Guest Service: A Culture of YES

In a recent global consumers report, 97% of the participants said that customer service is a major factor in their loyalty to a brand, and 76% said they view customer service as the true test of how much a company values them. And since there is no industry more reliant on customer satisfaction than the hotel industry, managers must be unrelenting in their determination to hire, train and empower the very best people, and to create a culture of exceptional customer service within their organization. Of course, this begins with hiring the right people. There are people who are naturally service-oriented; people who are warm, empathetic, enthusiastic, pleasant, thoughtful and optimistic; people who take pride in their ability to solve problems for the hotel guests they are serving. Then, those same employees must be empowered to solve problems using their own judgment, without having to track down a manager to do it. This is how seamless problem solving and conflict resolution are achieved in guest service. This willingness to empower employees is part of creating a Culture of Yes within an organization.  The goal is to create an environment in which everyone is striving to say “Yes”, rather than figuring out ways to say, “No”. It is essential that this attitude be instilled in all frontline, customer-facing, employees. Finally, in order to ensure that the hotel can generate a consistent level of performance across a wide variety of situations, management must also put in place well-defined systems and standards, and then educate their employees about them. Every employee must be aware of and responsible for every standard that applies in their department. The April issue of the Hotel Business Review will document what some leading hotels are doing to cultivate and manage guest satisfaction in their operations.