Top 5 legal issues facing hoteliers

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by Mahesh Patel

With the myriad of hospitality laws, hoteliers are often looking for ways to educate themselves on the major issues. Hospitality laws range from travel, food service, employee benefits, and more. It is a way to regulate different aspects of a hotel property and hotel owners must be in compliance with the laws in their state. Today’s Hotelier partnered with Patel & Associates to provide you a list of the top legal and compliance issues facing hoteliers today.

Franchise contract issues
The life cycle of the franchise agreement from the initial execution (whether it be a conversion or a new construction project) to the entrance into the franchise system can be challenging. Along with this there are many other related issues such as maintaining brand standards, guest complaints, integration of technology, and concerns about increasing competition not only from other brands but the franchisor itself. With the creation of new soft brands and the eventual defaults and termination fees which results from failure to either maintain the brand standards, or decrease in revenue from placement of similar brands (which all feed off the same central reservation system in the alphabet soup of brands) causes endless problems for the owner. In most cases, while the top line may be maintained or even increase, the bottom line profit keeps shrinking.

Labor/regulatory compliance
Labor laws include age and sexual discrimination, immigration enforcement, ADA compliance, and increased cost of labor. All these concerns add to the economic pressure placed on hotel owners.

Corporate governance
This includes partnership issues between partners, including close family members and the resulting litigation due to lack of proper operating agreements and buy/sell agreements. This makes it very difficult to bring in a new generation of hoteliers, as they do not always follow the old hierarchy of family relationships (and rightfully so). The new generation wants clearly-defined guidelines for duties and performance measurements; this falls in line with lack of transfer planning to the next generation.

Lack of proper insurance coverage
The lack of proper insurance coverage leads to a tremendous burden on the owner when a casualty occurs. In many cases, the clients do not have adequate coverage and fail to add essential coverage.

Increasing cost of development and renovations
Hotel renovations are something that almost every hotelier wants, but often have to reconsider due to the rise of hotel renovation costs.

 

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