ILHA EUROPEAN CHAPTER
DISPUTES IN THE LUXURY HOTEL SECTOR :
HOW TO AVOID THEM AND HOW TO MANAGE THEM
By Katherine Doggrell , Co-founder , NewDog PR
The latest webinar from ILHA Europe looked at the legal environment hotels are operating in as they come out of the pandemic and shore up their positions while finances remain rocky .
Within a relatively small sector such as hotels , this meant having strong relationships between owners and operators , supported by confidentiality clauses to save blushes over time .
Tim Dodd , Senior Associate at Katten Muchin Rosenman , said : “ Hotel Management Agreements tend to be long-term , 20 , 30-year relationships . And like all good relationships that are profitable and stable , a doctrine of regular communication between the stakeholders is absolutely key and paramount .
“ Of course there are frequent common battlegrounds within all management agreements , borne out of the nature of the relationship between the owner and the operator : you have the owner that owns the hotel or has title to the land and funds refurbishments and so on and feels they should have the right to advise or have some approval rights over the expenditures of the business .
“ Then you have the operator wanting to say : ‘ we ’ re experienced in this , we do this globally , can you leave us to it , and we ' ll provide you the most efficient and profitable operation ’.”
In the case of established operators , it was harder for the owner to make their voice heard but , Dodd said : “ For those operating in the more budget end , or with new entrants to the market , then they ' re likely to be able to get more favourable terms .
“ In those instances , the owner will be taking a bit of a risk , and it will want these approval rights over the expenditures over contracts being entered into , it will want a bit more of a priority in order to make sure that it ' s getting its money back . And it will want the ability to actually terminate operations .”
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