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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Sales & Marketing: Selling Experiences

There are innumerable strategies that Hotel Sales and Marketing Directors employ to find, engage and entice guests to their property, and those strategies are constantly evolving. A breakthrough technology, pioneering platform, or even a simple algorithm update can cause new trends to emerge and upend the best laid plans. Sales and marketing departments must remain agile so they can adapt to the ever changing digital landscape. As an example, the popularity of virtual reality is on the rise, as 360 interactive technologies become more mainstream. Chatbots and artificial intelligence are also poised to become the next big things, as they take guest personalization to a whole new level. But one sales and marketing trend that is currently resulting in major benefits for hotels is experiential marketing - the effort to deliver an experience to potential guests. Mainly this is accomplished through the creative use of video and images, and by utilizing what has become known as User Generated Content. By sharing actual personal content (videos and pictures) from satisfied guests who have experienced the delights of a property, prospective guests can more easily imagine themselves having the same experience. Similarly, Hotel Generated Content is equally important. Hotels are more than beds and effective video presentations can tell a compelling story - a story about what makes the hotel appealing and unique. A video walk-through of rooms is essential, as are video tours in different areas of a hotel. The goal is to highlight what makes the property exceptional, but also to show real people having real fun - an experience that prospective guests can have too. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.