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Meet the Money® 2014

ADA defense and compliance

EB-5 financing

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Hotel Management Agreements

Hotel Franchise & License Agreements

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This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer. Please contact me at Jim Butler at jbutler@jmbm.com or 310.201.3526.

Published on:

13 June 2016

To maintain the confidentiality of hotel data, STR imposes certain restrictions on the hotels for which it will provide competitive set data. The Marriott-Starwood merger is shaking up the world of competitive sets with the result that many owners will need to revise the competitive sets specified in their hotel management agreements.

As Bob Braun explains in the article below, considering the need to identify appropriate hotels for new competitive sets, and negotiation of amendments to hotel management agreements, it would probably be wise to start now on this process.

 

STR Adopts New Competitive Set Guidelines – Impact on Owners

by
Bob Braun, Hotel Lawyer and Data Security Advisor

The importance of the competitive set

Many hotel management agreements contain performance test standards allowing an owner to terminate a management agreement if the hotel fails to meet specified guidelines, and most of those tests incorporate a “RevPAR Test” – whether the hotel’s revenue per available room is comparable with a set of competitive hotels, its “competitive set.” The RevPAR test typically allows an owner to terminate a management agreement if the hotel’s RevPAR fails to meet a specified percentage, or index, of the competitive set’s RevPAR. Competitive sets can also be used to determine incentive pay or for other measures of performance, as well as projections of potential performance.

The competitive set data is typically provided by a single source: STR, Inc. STR has established itself as a unique provider of supply, demand, and overall performance data for the hotel industry by collecting financial performance and other information from a vast number of hotels in the United States, and using that information to create anonymized measures of performance.

The STR competitive set allows parties to select a known group of comparable hotels and measure performance against that set without seeing their actual financial data. Spurred on by changes in the hotel brands –the Marriott – Starwood merger is the most recent and highest-profile example — STR announced that, effective January 1, 2017, it will impose a new set of guidelines for determining eligibility of competitive sets.

STR’s new guidelines

The new guidelines contain the following key elements:

  • No single property and no single brand can comprise more than 50 percent of the total room count, excluding the subject property and other properties from the same company as the subject.
  • No single company can account for more than 70 percent of the total participating room supply of a competitive set, excluding the rooms of the subject property and other properties from the same company as the subject.
  • Sets must include a total of four properties, excluding the subject, and a minimum of two companies, excluding the subject.

CONTINUE READING →

Published on:

13 May 2016

Hotel industry fundamentals are good, and will continue to improve. But the hotel industry is being punished by the disconnect between the investment community of Wall Street and actual performance of the hotels on Main Street. More on the nature of this disconnect shortly, but first, here is the current situation as summarized by Vail Brown of STR last week at the 26th annual Los Angeles hotel investment conference, Meet the Money®.

Total United States Key Performance Indicator Outlook (% Change vs. Prior Year) 2016 – 2017

Note that the actual results for 2015 and the forecast for 2016 and 2017 are pretty good – not as spectacular as they have been in some recent past years, but very sound in terms of long-term trends. Notice also that the average national supply growth is still below the 2% level that raises concerns for oversupply. Demand growth is continuing at a rate greater than supply growth, and that is healthy. While occupancy growth is modest, strong ADR growth is driving RevPAR growth at good levels.

Looking beyond the averages into specific markets

National average statistics are most informative when variations from the median are relatively small. Also, averages can be misleading when there are statistical outliers or even significant variations. That seems to be the case currently, with markets like New York City and Houston struggling, and significant localized damage in oil patch markets.

This problem is illustrated by this slide from Vail Brown’s presentation at Meet the Money®. Note that the declining RevPAR growth in New York City and Houston dragged down the entire industry averages. Many industry leaders believe that New York’s problems have also overly influenced the financial community’s perspective on the hospitality industry, incorrectly assuming that industry performance in New York City is representative of the entire industry. CONTINUE READING →

Published on:

10 May 2016

One of the great breakout sessions at our recent Meet the Money® hotel conference in Los Angeles was organized by my partner Bob Braun and moderated by Jeff Higley of HotelNewsNow. I was particularly impressed by the panel’s evidence of how costly cybersecurity breaches can be, how much can be done to prevent or limit exposure, and how reasonable the cost can be for a pro-active approach.

Here is Bob Braun’s summary of this panel last week in Los Angeles. This is a compelling call for an ounce of prevention. . .

 

5 Cybersecurity takeaways from Meet the Money®
by
Bob Braun, Hotel Lawyer and Data Security Advisor

Meet the Money® changes with the times, and the 2016 conference showcased the first panel on Cybersecurity in the hospitality industry – “Who’s Knocking at Your Digital Door,” featuring Bob Braun, from JMBM’s Global Hospitality Group and Co-Chair of the Firm’s Cybersecurity and Privacy Group; Bob Justus, of Optiv Security; Brad Maryman, from Maryman & Associates; Christian Ryan, from MARSH; and Kevin Shamoun, from Zeamster.  Jeff Higley, of STR/HotelNewsNow.com moderated the panel.

The panelists, representing technical, legal law, law enforcement, insurance and payment systems, identified key cybersecurity challenges for the hospitality industry.  Five key takeaways were:

  • Compliance does not equal security. Each of the panelists agreed that while meeting legal and business requirements is essential, compliance does not necessarily achieve real cybersecurity — completing checkboxes on a task list or questionnaire is only a first step. The panelists noted that each of the major hotel breaches in the last year, which involved every major hotel chain, implicated point of service credit card systems that complied with industry standards.  Hotels and hotel companies need to look beyond complying with standardized requirements and has to evaluate their own risk profile and apply meaningful security plans.
  • Informed response is better than instant response. Too many organizations make the mistake of reacting before they think, especially when reporting a breach. Data breaches can be complicated matters, and it is essential to understand the scope of the breach, the data and individuals involved, and how a firm can remediate the source of the problem before disclosure. There is no question that speed is important, but some breaches do not require notification, while acting without ascertaining the facts can require multiple notifications, which is damaging to reputation and sends the wrong message.
  • Credit cards are not the only risk. While much focus is placed on the theft of credit card numbers, hotels must consider other risks. Hotels and hotel companies hold massive amounts of sensitive personal information that can be used to steal a guest’s identity.  Moreover, hotels need to consider more than data; the interconnection of systems means that breaking into a financial structure can give a hacker access to door locks, heating and air conditioning systems, electrical, plumbing and other key structural and physical parts of the hotel.  What would happen if a hacker flooded a hotel, or opened the doors?  This damage can far exceed the damage from lost credit cards, and cause untold damage to the hotel, its brand and owners.

CONTINUE READING →

Published on:

07 May 2016

Meet the Money® 2016 – Deals, dialog and learning
Conference presentations now available

JMBM’s Meet the Money® 2016, completed its 26th national hotel finance and investment conference this week in Los Angeles.

While all seem to agree that hotel fundamentals remain strong and that interest rates will remain low in the immediate future, hotel industry leaders expressed more caution than in recent years. They are still doing deals – particularly those that fit into established strategies. In fact, there are a number of creative deals going on, of all sizes, and it is always exciting to hear from so many developers and capital providers who are enthusiastic about their work and the industry.

Many expressed a healthy respect for stricter underwriting and shared the lessons learned from the Great Recession. All our speakers and participants exchanged perspectives, ideas, business cards and lots of good stories.

Presentations available from Vail Brown of STR, Suzanne Mellen of HVS, Mike Cahill of LIIC and HREC, Dan Lesser of LW Hospitality Advisors, Alan Reay of Atlas Hospitality, and Bill Linehan of RLHC

Select presentations from Meet the Money® 2016 can be found on HotelLawyer.com. Individual presentations include: CONTINUE READING →

Published on:

 

To download the LIIC Top Ten presentation, click here.

(Denver, CO) For well over a decade, the members of the hotel industry’s preeminent think tank, “LIIC – The Lodging Industry Investment Council,” are annually surveyed to develop a list of the major hotel investment opportunities and challenges for the coming year. This exhaustive survey results in the LIIC Top Ten; a highly regarded profile of investment sentiment and attitudes for the lodging industry for the forthcoming 12 months. Altogether, the members of LIIC represent direct acquisition and disposition control of well over $40 billion of lodging real estate.

Members are highly active and have the pulse of the market, with 57% of LIIC hotel investors having successfully purchased a hotel in the last 12 months and 38% currently having additional acquisitions under a purchase and sale contract.

The hospitality industry’s most influential investors, lenders, corporate real estate executives, REIT’s, public hotel companies, brokers and significant lodging equity sources are represented on the Council. LIIC serves as the leading industry think tank for the lodging business (www.liic.org).

Mike Cahill, LIIC co-chairman, produced this year’s survey (www.mikecahill.com). Mr. Cahill is CEO and Founder of HREC – Hospitality Real Estate Counselors, a leading international hotel and casino advisory and brokerage firm (15 offices nationwide) specializing in lodging property sales, debt financing, consulting, appraisals and litigation support (www.hrec.com). Kyle Halbrook & Nate Shartar, Associates in HREC’s Denver office, assisted throughout the process.

2016 Top Ten LIIC Survey Results:

1. Hotel Investors: Active yet Cautious in Underwriting and Pricing: In a striking reversal from 2015’s unbridled optimism, the 2016 results reveal that investors are now underwriting more carefully and pricing an uncertain future into their acquisition bids. However, market participants, as a whole, remain positive and active.

2. Movement in the Hotel Real Estate Cycle?: After the past two years, when investors believed we were “real estate cycle stagnant” and solidly grounded in the 5th to 6th innings of the current lodging investment cycle, the 2016 survey is sensing strong movement. Today, 68% believe we have moved along to the 7th/8th innings and 17% go further, believing we are in the 9th inning. Similarly, 42% believe hotel real estate values peaked in 2015 and 28% believe values are currently peaking in 2016. When asked the same concept but worded differently, the current survey indicated 2006 (34%) was the most similar year in past cycle, with 2007 following closely behind at 28%. CONTINUE READING →

Published on:

1 May 2016

Federal Judge Takes Decisive Action to Protect Hotels from ADA Abuse by a High Frequency Litigant
by
Martin H. Orlick, Chair, JMBM’s ADA Compliance and Defense Group

In a rare and decisive action, a Central District Court Judge dismissed an Americans with Disabilities Act (ADA) lawsuit filed by an Arizona disabled plaintiff who has recently filed a wave of over 70 ADA lawsuits against Southern California hotels.

The plaintiff, who claims she is confined to a wheelchair, called an Orange County hotel to book a room.  She asked the hotel representative whether the hotel pool and Jacuzzi had a pool lift or other means of access for disabled persons.  The hotel employee allegedly reported that the hotel had no pool lifts.  Thereafter, allegedly, plaintiff’s “agent,” and ADA investigator, visited the hotel, verified that there were no pool lifts, and notified the plaintiff of other ADA violations.  The plaintiff claimed that she regularly frequents the area where the hotel is located and plans to do so in the future.  If there was a pool lift, plaintiff claims, she would stay at the hotel in the future.

The plaintiff, Theresa Brooke, has filed over 70 ADA lawsuits against Southern California hotels in the past 6 weeks, “every single one of which” in boilerplate fashion alleges ADA violations based on inaccessible hotel pools and spas.  In dismissing the lawsuit, the Judge noted that the “deluge [of ADA lawsuits] is ongoing, noting plaintiff, it appears, would like to stay at every Orange County hotel that presently has an inaccessible Jacuzzi.”

Citing a recent opinion (Brooke v. Kalthia Group Hotels), the trial judge on his own motion dismissed the lawsuit finding that plaintiff had not stated a claim under the ADA because a plaintiff who had not visited the hotel cannot litigate a case against the hotel based solely on calling the hotel, seeing pictures and taking a call from her private investigator. CONTINUE READING →

Published on:

27 April 2016

In Memoriam: William G. Sipple

All of us in the hospitality industry will miss the warm smile, good humor and practical insights of our colleague, Bill Sipple, who left us too soon. I am proud to have counted Bill as a good and long-time friend.

A seasoned hospitality executive, he was the consummate professional and all who worked with him in any capacity recognized the value of his leadership. It was always great working with Bill on any transaction, whichever side of the transaction he was on, but I always liked being on his side the best. His talents, focus, and energy made him one of the lights of our industry. He calmed rough waters, got deals done, and was just plain fun to spend time with.

Thanks for all you gave to our industry, Bill. Your family is in our thoughts and prayers.

The Sipple family suggests donations to the Lustgarten Foundation for Pancreatic Cancer Research in lieu of flowers.

Sipple 2

CONTINUE READING →

Published on:

Meet the Money® 2016 – May 2-4, 2016: 26th National Hotel Finance & Investment Conference in Los Angeles

Getting to the winner’s circle – marathon, sprint or obstacle course?

LOS ANGELES  The 26th annual edition of Meet the Money®, the national hotel finance and investment conference, will be at the Sheraton LAX May 2-4, 2016. The conference will host hotel owners, developers, operators, brands, lenders, investors and other capital providers.

Conference speakers will explore financing, re-financing, development, and deals, as they try to answer the questions: what part of the investment cycle are we in? And what should you do about it?

“Industry fundamentals continue to be positive,” said Jim Butler, Chairman of JMBM’s Global Hospitality Group®. “Investor sentiment seems to be shifting. With the REITs on the sidelines, some see this as a great buying opportunity. Others see storm clouds on the horizon and seek shelter from investment risk. Uncertain times like this make it important to decide what strategies will get you to the winner’s circle.”

Meet the Money® 2016 will present 25 panels and special presentations featuring more than 100 industry leaders, including:

  • Thought leaders from the Executive Suite
  • Changes in Chinese investment in U.S. hotels, and what this means to you
  • Investment strategies in a changing market
  • Many panels with lenders, equity investors and other capital providers
  • Construction financing
  • Bread & butter financing
  • EB-5 financing
  • Buying and selling hotels
  • Optimizing hotel value with brands and management
  • Cybersecurity breaches and preventative measures
  • Dress for distress–avoiding pitfalls and finding opportunities

CONTINUE READING →

Published on:

23 February 2016

As the number of ADA lawsuits continues to explode, both Federal and California lawmakers are considering steps to limit abusive ADA lawsuits.

Here is an update on these positive developments from my partner, Marty Orlick, who heads JMBM’s ADA Compliance & Defense Group that has defended more than 600 ADA cases and DOJ investigations.

Amid Growing Concerns Over the Proliferation of ADA Lawsuits, Congress and the California Legislature Address Measures to Curb ADA Abuse
by
Martin H. Orlick, Chair, JMBM’s ADA Compliance and Defense Group

Since 2004, more than 20,000 ADA lawsuits have been filed in the country’s federal courts. The number of ADA filings in state courts is unavailable, but likely runs in the thousands. Nearly one half of all ADA lawsuits were filed in California with no end in sight.

From September 2013- December 2014 (the last time period the figures are available) more than 3,000 ADA lawsuits were reported to the California Commission on Disability Access (CCDA). According to the CCDA, more than one-half – 54% – of all construction-related accessibility complaints filed in California were filed by 2 law firms (one of the lawyers is fighting a State Bar suspension stemming from ADA litigation).

According to the CCDA, 46% of all complaints were filed by 14 plaintiffs seeking quick settlements rather than correction of the alleged access violations. For years, thousands of businesses, including many small minority-owned businesses, have been targeted by a growing number of repeat plaintiffs and law firms. This increasing trend has prompted state and federal action to curb ADA abuse.

For example, these findings prompted the California Legislature to enact Civil Code Section 425.55 which is intended to curb ADA abuse. Section 425.55 defines these serial plaintiffs and their attorneys as “high-frequency litigants” and requires specific procedural and substantive conditions to be met before they can file litigation.

For all who own or operate businesses serving the general public, it is important to know about state and federal efforts requiring would-be plaintiffs and their attorneys to provide a specific pre-filing notice and opportunity to cure before they can initiate litigation and how these new laws impact you. Thus far, there are no notice and cure requirements. CONTINUE READING →

Published on:

08 February 2016

Hotel Lawyer in Los Angeles at the latest EB-5 Summit

If you have been thinking about tapping into EB-5 financing for your development project, this is the time to make your decision and act quickly. If you need background on what the EB-5 program is about, how it has gone mainstream with institutional investors for several years, and is now providing a steady stream of reliable capital, please see the articles referenced at the bottom.

We think that JMBM’s Global Hospitality Group® EB-5 financing team has a pretty good perspective on the opportunity, the risks, and how to get clean execution. For the 18 months ended December 31, 2015, our team closed more than $1 billion of EB-5 financing loans, and we sourced more than $700 million of these loans for our clients.

If you have missed our reporting of key events affecting the availability of EB-5 financing here, you need to know that the EB-5 program was extended for another year through September 30, 2016 without any changes. But just as the maximum number of visas has been reached in each of the past two years, the experts expect that we will “cap out” at the maximum 10,000 visas even earlier in 2016 – possibly as early as May or June.

And the “reformers” are still out there, with proposals to revise the EB-5 program the next time it comes up for renewal. So this is a great time to move into action while EB-5 financing continues to be accessible for top developers with great projects and a strong track record.

We are confident that most people who delay will wish they had started earlier and gotten in on this great source of relatively inexpensive financing early in the game. CONTINUE READING →