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This is Jim Butler, author of and hotel lawyer. Please contact me at Jim Butler at or 310.201.3526.

Published on:

23 November 2015

As the biggest merger in the history of the hospitality industry,  the Marriott-Starwood merger, is grabbing headlines worldwide. Most of the recent press has focused on the sheer size of the potential transaction. But in his article below, my partner and hotel lawyer Bob Braun, considers the practical impact of the merger on hotel owners, franchisees and developers. With the loss of the Starwood family of brands as an independent and significant competitive force in the industry, the merger will bring mixed blessings to stakeholders.


The Marriott-Starwood merger – Is bigger really better?

Impact of the merger on hotel owners, franchisees and developers

Robert E. Braun | Hotel Lawyer

The proposed merger between Marriott and Starwood will, by all accounts, create a behemoth in the hotel industry. If the merger goes through as planned, the combined company will be the world’s largest hotel company, with more than 5,500 hotels under management or franchise, 1.1 million hotel rooms around the world, 30 hotel brands and up to 75 million hotel loyalty members.

While commentators have speculated as to whether the combined entity will benefit consumers, stockholders or frequent guests, little has been said about how it could impact hotel owners, franchisees and developers currently in either of the brand families or looking to them in the future. No one will really know until after the merger (if it is, in fact consummated, and there are a variety of hurdles to closing such a complex transaction), but the JMBM Global Hospitality Group has negotiated many hundreds of franchise agreements, including agreements with virtually every major hotel brand, and we believe hotel owners should consider a few important factors:

Will Owners Have Fewer Choices? The first, and most obvious, impact on any potential owner is that the field has been reduced by a significant player. Thirty brands (31, if we include the new Grand Sheraton brand) may remain, but in fact they will be operated by a single entity, and that entity will decide on what brands will be available in a given market. Moreover, the differences between particular brands in a given price or quality segment are likely to be reduced. How long, for example, will Sheraton or Le Meridien hotels be markedly different from Marriott or Renaissance properties? Where will they be positioned relative to other brands in the new combined family?

Any hotel owner, franchisee or investor should also recognize that the Marriott-Starwood merger might only be the first of its kind. Many analysts predict that other brands will merge to create the size and influence that will allow them better to compete with the largest hotel branding company in the world. If that happens – and transactions like this seem to occur in bunches – owners will have even fewer choices.

Will Owners Have Reduced Leverage? The immediate corollary to fewer choices is reduced leverage. A hotel owner will no longer be able to create a competition between two of the largest players in the business; Marriott/Starwood is unlikely to bid against itself for management or franchise opportunities.

This challenge is likely to extend beyond just the merger of Marriott and Starwood. Other major brands – Intercontinental Hotel Group, Hilton Hotels, Hyatt Hotels to name a few – will have greater bargaining power when negotiating with owners because there will simply be fewer competing companies.

Will Hotel Companies be Less Flexible? A common concern among hotel owners is the desire for their brands to acknowledge the unique qualities of each property. While some franchised or branded businesses can achieve a high degree of uniformity, hotels are special, and hotel owners need brands to recognize that. As much as brands strive to create a consistent experience at all properties operating under the same name, local differences – whether it be location, common amenities, zoning, legal restrictions, competition or otherwise – have to be addressed. But larger companies have greater reasons to increase efficiency and reduce variations between different properties, and hotel owners may have difficulty ensuring that local needs are met.

Will New Players Step Into the Breach? At the same time, it may be possible for new, smaller and more nimble brands to make inroads in this market. If there is less differentiation between different flags, if the larger players are less flexible, the smaller players may find inroads and opportunities that are closed to them now. It’s even possible that Marriott-Starwood may choose to shed some brands, for antitrust or business reasons, giving rise to new competition.

The JMBM Global Hospitality Group® believes that hotel owners should be mindful of these concerns when considering their branding opportunities, and when negotiating with brands. Our practice focuses on leveling the playing field between brands and owners, and creating a lasting, functional relationship between them. While this merger may lead to a new set of rules for the road, we are ready to help our clients understand the new realities navigate the new landscape.


Published on:

03 November 2015

FCC takes two enforcement actions on Wi-Fi

On November 2, 2015, the FCC issued two separate news releases on Wi-Fi blocking. In one action, the FCC announced a $718,000 fine against M.C. Dean, one of the nation’s largest electrical contracting companies, for blocking personal mobile “hotspots” of convention visitors and exhibitors who tried to use their own data plans at the Baltimore Convention Center to connect to the Internet rather than paying M.C. Dean substantial fees to use the company’s Wi-Fi service.

FCC fines Wi-Fi hotspot provider M.C. Dean

According to the FCC, as the exclusive provider of Wi-Fi access at the Baltimore Convention Center, M.C. Dean charges exhibitors and visitors as much as $1,095 per event for Wi-Fi access. Last year, the Commission received a complaint from a company that provides equipment that enables users to establish hotspots at conventions and trade shows. The complainant alleged that M.C. Dean blocked hotspots its customers had tried to establish at the Baltimore Convention Center. After receiving the complaint, FCC Enforcement Bureau field agents visited the venue on multiple occasions and confirmed that Wi-Fi blocking activity was taking place.

The Enforcement Bureau’s investigation found that M.C. Dean engaged in Wi-Fi blocking at the Baltimore Convention Center on dozens of occasions in the last year. During the investigation, M.C. Dean revealed that it used the “Auto Block Mode” on its Wi-Fi system to block consumer-created Wi-Fi hotspots at the venue. The Wi-Fi system’s manual describes this mode as “shoot first, and ask questions later.” M.C. Dean’s Wi-Fi blocking activity also appears to have blocked Wi-Fi hotspots located outside of the venue, including passing vehicles. The Commission charged M.C. Dean with violating Section 333 of the Communications Act by maliciously interfering with or causing interference to lawful Wi-Fi hotspots.

FCC fines and warns Hilton

In a separate announcement, unrelated except as to the subject matter, the FCC proposed a $25,000 fine against Hilton Worldwide Holdings, Inc. for “apparent obstruction of an investigation into whether Hilton engaged in the blocking of consumers’ Wi-Fi devices”. A consumer complaint alleged that Hilton was blocking visitor’s Wi-Fi in Anaheim, California in order to force them to pay a $500 fee to access Hilton’s Wi-Fi. Other complaints alleged similar Wi-Fi blocking at other Hilton-brand properties. CONTINUE READING →

Published on:


02 October 2015

We are pleased that the Continuing Resolution passed by Congress yesterday includes a temporary extension of the EB-5 Regional Center Program. This extension allows the program to continue generating foreign direct investment and creating U.S. jobs through December 11, 2015.

In addition to extending the current program to December 11, this will also provide additional time for Congress to consider a long-term reauthorization bill that would include reform measures to strengthen federal oversight and the integrity of the program. Members of Congress from both parties and both the House and Senate are negotiating in good faith.

This week, two Senate bills were introduced that propose revisions to the EB-5 program.

Last week, our team closed $350 million in EB-5 financing for our developer clients. We have sourced more than $700 million in EB-5 financing for developer clients and believe the EB-5 program will continue to be an important source of funding for qualified projects.

We will continue to report on EB-5 developments as they unfold. CONTINUE READING →

Published on:

21 September 2015

The Global Hospitality Group® is best known for its expertise in connection with hotels and resorts. We also have an active restaurant practice, and like a hotel, a restaurant is an operating business integrally intertwined with special purpose real estate. We frequently advise restaurant owners and operators on labor and employment, ADA, management, and finance and licensing issues, and we have a particular expertise relating to celebrity chef deals.

Senior Global Hospitality Group® member David Sudeck recently participated in a roundtable discussion about the food and beverage industry in Los Angeles, published in the Los Angeles Business Journal. The following discussion about licensing issues, EB-5 and crowdfunding investment in restaurant projects, gift card and loyalty programs and tax planning strategies is based on the roundtable and includes some clarifications and updates.


The Food & Beverage Industry in Los Angeles: A Roundtable Discussion
Supplement to the Los Angeles Business Journal

The food and beverage industry is unique in many ways. And here in Los Angeles, where we have some of the best dining and food-for-purchase options in the nation, there may be an even more finely tuned set of rules for success. Stir in an unpredictable economy and you’ve got a sector of Southern California business that continues to evolve faster than most. To make some sense of this exciting and unpredictable realm, the Los Angeles Business Journal turned to some of the leading experts in the region – from the financial, legal and business perspectives – to get their diverse insights and assessments regarding the current state of the industry that Angelenos most certainly couldn’t live without!


Published on:

09 September 2015

EB-5 is at a critical renewal point

The next 3 weeks are going to be crucial for the EB-5 industry as the current legislation sunsets on September 30, 2015. While the consensus is that this important program will be renewed, and perhaps made permanent, there are lots of currents circulating about possible changes in the program.

We want to share with you some keen insights we recently received.

EB-5 update and insights from an industry insider

Below is the full text of a letter recently sent to industry colleagues by Pat Hogan, President, CMB. Pat is one of the leading proponents of EB-5, and is also a founder and board member of the IIUSA (Invest In the USA) which is the national industry trade association for the EB-5 Regional Center Program.


I wanted to share my thoughts with you after having recently visited no less than 60 Congressional and Senatorial offices within the last 40 days. I also just attended the American Immigration Lawyers Association (AILA) EB-5 Investors Summit this past weekend in Las Vegas.


Published on:

02 September 2015

Blocking Wi-Fi connections is “patently unlawful”

On August 18, 2015, the FCC announced a $750,000 civil penalty and formal Consent Decree with Smart City Holdings for blocking consumers’ personal Wi-Fi access at various convention centers, meeting centers and hotels around the United States. Smart City is an internet and telecommunications provider for such facilities, and had been blocking personal mobile “hotspots” being used by convention and meeting attendees.

Apparently referring to the $80 daily fee charged by Smart City for use of its Wi-Fi at the events, Travis LeBlanc, Chief of the FCC’s Enforcement Bureau said, “It is unacceptable for any company to charge consumers exorbitant fees to access the Internet while at the same time blocking them from using their own personal Wi-Fi hotspots to access the Internet.”

The FCC Enforcement Chief went on to say, “All companies who seek to use technologies that block FCC-approved Wi-Fi connections are on notice that such practices are patently unlawful.”

The FCC is focused on preventing Wi-Fi blocking

The FCC action in the Smart City case really emphasizes how serious the FCC is about stopping the practice of hotels and related facilities from blocking consumer hotspots in order to sell their own more expensive access to the internet.

Starting with high-profile investigation and settlement with Marriott International last year, the FCC has taken the following steps: CONTINUE READING →

Published on:

31 August 2015

Massive data breaches affect hotels and their legal responsibilities. As unauthorized hacking of confidential data explodes in volume and seriousness, minimum expected standards are evolving that hoteliers and others must follow. Interestingly, the latest guidelines are provided in an August 24, 2015 appellate court decision involving Wyndham Worldwide as if to emphasize that these rules (really) apply to the hotel industry. How did this case arise? What are some basic steps that everyone with confidential data is expected to take? What happens if they don’t?

In the article below, my partner Bob Braun, explains the current situation and what it means to our industry.

FTC vs. Wyndham Worldwide – What it Means for Hotel Owners

Bob Braun, Hotel Lawyer and Data Security Advisor

Background on the case

On August 24, 2015, the Third Circuit United States Court of Appeals issued its ruling in the case FTC v. Wyndham Worldwide Corporation. The case was highly anticipated by the data security community generally for its expected ruling on the authority of the Federal Trade Commission to regulate data security standards, but nowhere was the anticipation more keen than in the hospitality industry. After all, this decision didn’t deal with retailers, banks or dating sites – it addressed a major hotel player and, by implication, all operators, brands and owners in the industry.

We know that cybercrime is big. In 2014, there were 42.8 million detected security incidents (and, most likely, many more that were never discovered). Estimates of annual cost of cybercrime to the global economy ranges from $375 billion to as much as $575 billion as companies face increased vulnerability, ranging from greater technology available to cybercriminals and new types of cybercrime, like crypto-ransom. CONTINUE READING →

Published on:

24 June 2015

Bill Sipple, Executive Managing Director of HVS Capital, speaks in the video below about activity in different markets, limited service properties, and whether rising interest rates will have an effect on transactional activity.

Bill sat down with Bob Braun, a senior partner in the JMBM Global Hospitality Group®, as part of our video interview series on hotel finance and investment opportunities in 2015.

A transcript follows the video.

Bill Sipple discusses hospitality market activity and interest rates - Meet the Money® conference

Bob Braun: Hi, I’m Bob Braun. I am a Partner at Jeffer Mangels Butler & Mitchell. I’m here at Meet the Money® 2015, our 25th anniversary. I’m here with Bill Sipple, who is the Executive Managing Director of HVS Capital. Bill, thanks for coming by and talking with us.

Bill Sipple: It’s good to be here, thanks. CONTINUE READING →

Published on:

23 June 2015

Jack Westergom, Managing Director of Manhattan Hospitality Advisors, discusses hotel operating agreements, asset management, and the RFP process in the video below.

Jack spoke with David Sudeck, a senior partner in the JMBM Global Hospitality Group®, as part of our video interview series on hotel finance and investment opportunities in 2015.

A transcript follows the video.

Jack Westergom discusses hotel operating agreements, asset management and cycles - Meet the Money®

David Sudeck: I’m David Sudeck. I’m a senior attorney with Global Hospitality Group® at Jeffer Mangels Butler & Mitchell. We’re here at the 25th Annual Meet the Money® Conference. I’m here with Jack Westergom, Managing Director of Manhattan Hospitality Advisors. Welcome.

Jack Westergom: Thank you. CONTINUE READING →

Published on:

22 June 2015

US Supreme Court voids Los Angeles ordinance requiring hotel operators to turn over guest records on demand

In a 5-4 opinion rendered on June 22, 2015, the United States Supreme Court held that a Los Angeles municipal code provision violates the US Constitution’s Fourth Amendment prohibition on unreasonable search and seizures. The invalidated LA Code provision requires hotel operators to make guest records available to the police upon request. This case may be significant because many cities throughout the country have similar laws, and they are now all constitutionally suspect. On the other hand, for reasons discussed below, most hotel operators will probably not care to challenge a records request, and there are expedient alternatives available to cities and police, including administrative subpoenas. See below to access the full Supreme Court opinion in City of Los Angeles v. Patel.

Read on to learn more about the Los Angeles City code’s  provisions, the history of the challenge in the District Court, appeals to the Ninth Circuit, and the US Supreme Court’s decision. CONTINUE READING →