Articles Posted in Hotel Management Agreements

Published on:

16 November 2021

See how JMBM’s Global Hospitality Group® can help you.

LOS ANGELES—The Global Hospitality Group® (GHG) of Jeffer Mangels Butler & Mitchell LLP (JMBM) has released an updated version of its Hospitality Credentials, detailing unsurpassed experience by providing representative clients and properties the GHG has worked on over the past 30 years. These Credentials show how the GHG has helped clients with more than 4,500 hospitality properties, valued at more than $112 billion.

Some notable accomplishments by members of the GHG over the last 12 months include:

  • Workout, recapitalization and repositioning of a $1 billion mixed-use lifestyle hotel project
  • Sale of a NYSE-traded hotel REIT’s entire portfolio of 15 upscale, select service hotels for $305 million
  • Closing more than $210 million in Commercial Property Assessed Clean Energy loans (C-PACE)
  • Assisting clients with hotel management and franchise agreements for properties worth more than $1.5 billion
  • Serving as primary counsel for lenders on more than $2.2 billion in distressed hotel, retail and office loans during the global pandemic, including over $500 million for a single client

CONTINUE READING →

Published on:

14 June 2021

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on Hotel Management Agreements.

After over a year of uncertainty and economic upheaval, the hospitality industry is quickly beginning to recover from the effects of the coronavirus. As hotels welcome an increased number of visitors, many owners are considering how to improve the management of their properties. One of the best ways to do this is to have a good management agreement in place. In the article below, my colleague Bob Braun suggests some key things to keep in mind when drafting a new agreement.

Hotel Lawyer: 5 Tips for your next Hotel Management Agreement (HMA)

by Bob Braun, Hotel Lawyer

Is it time to re-think your management agreement?

As the hospitality industry moves toward recovery, many hotel owners are re-evaluating the management of their properties. A good manager can bring great value to a property; a poor manager can reduce its value. Some studies have concluded that a good management agreement – one that provides for meaningful accountability, transparency and performance – can add or subtract 50% to the value of a hotel. The next normal will likely require rethinking how to maximize the efficiency and effectiveness of operations, rather than simply riding post-recession boom, and to plan for the future, not just hearken back to the past.

The Global Hospitality Group® at Jeffer Mangels Butler & Mitchell LLP has been negotiating, re-negotiating, litigating, arbitrating and advising clients for more than 30 years on more than 2,500 hotel management and franchise agreements. Our experience extends to virtually every brand and every significant independent manager, as well as many less well-known players. Based on that experience, we thought it would be helpful to provide a few tips that owners should bear in mind when considering the hotel management agreement. CONTINUE READING →

Published on:

23 October 2020

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on Hotel Management Agreements and Hotel Franchise & License Agreements, and download our HMA & Franchise Agreement Handbook (3rd ed).

One of the biggest mistakes owners and developers continue to make is negotiating a “nonbinding” term sheet on various hotel arrangements, such as hotel franchise and hotel management agreements. This can be a costly misstep for the reasons Bob Braun points out in this article on a classic but perennial problem.

First Things First – The Letter of Intent in Hotel Agreements
by
Bob Braun, Hotel Lawyer

Love at First Sight?

How hotel developers and owners, on one hand, and hotel brands, on the other, meet and agree to brand a hotel or resort property is a complicated process. Sometimes developers or owners seek out a brand, and sometimes a brand will approach a potential owner. Either way, the developer/owner meets with a development executive from the brand, and the two parties see if they have enough in common to talk seriously about a long-term relationship. During those early stages, each is trying to demonstrate its resources, seriousness, and commitment to a long-term relationship of 20 years or more. They trade pro forma financials, introduce key personnel, and in pre-Covid days, wine and dine each other. Brands will research the background and business history of their potential franchisee, and owners will seek out other owners for references and their real-life experiences. Owners will study the performance of brands throughout the world, especially where the project is in a foreign locale. The process resembles a mating dance: owners are courting brands, and brands are courting owners. And most typically, owners declare the seriousness of their intentions with an application fee – a very large application fee.

At that point, the brand and owner negotiate and enter into a non-binding letter of intent. The letter of intent makes it clear – the terms in the letter are nothing more than a good faith statement of the desire to move forward and discuss the details. Owners negotiate the basic terms in the letter of intent, and after seeing that the letter is, by its terms, not binding, they sign it, believing that they and the lawyers will have another chance to revisit those issues that might concern them.

Reality Sets In

Unfortunately, brands and managers don’t take that position. They believe that while the letter of intent may state that it is “not binding,” the terms in the letter are not subject to meaningful negotiation once it is signed. More than that, they take the position that if a business or legal term is important to the owner, it must be in the “non-binding” letter of intent; otherwise, the brand will revert to their standard terms and conditions. As becomes painfully clear as the parties negotiate a franchise or management agreement with the brand, there are relatively few points open for negotiation, but if overlooked in the preliminary discussions, it may be impossible to reclaim them no matter how important. CONTINUE READING →

Published on:

17 July 2020

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on Hotel Management Agreements and Hotel Franchise & License Agreements, and download our HMA & Franchise Agreement Handbook.

Franchise and Management Disputes in the Time of Covid
by
Robert Braun

If you are reading this, you are almost certainly in the hospitality industry, and you are most likely in a financial and emotional distress. During trying times, hotel owners rely more than ever on their brands and managers – the professionals that owners engage to protect the multi-million dollar investments that they have made in building, maintaining and upgrading properties. Owners rely on brands to drive occupancy and revenue, and on managers to make the most effective and efficient use of those revenues to drive the bottom-line revenues that allow owners to cover debt service, insurance and other expenses, and provide a return – without which no thinking investor would finance a hotel.

At the same time, the Covid-19 pandemic has driven hotel occupancy and rates fallen to levels that were previously unimaginable. Brands and managers are not to blame for the pandemic, but this is the time when they must stand up and work with owners to preserve their assets and prepare for the eventual – and lengthy – return to normal, whatever that normal may be.

Unfortunately, in many cases, brands and managers have not always met the challenge. Many brands and managers have simply submitted, without explanations, edicts regarding closing or reducing operations, demanding funds, and reduced responsiveness. Hotel companies have, across the board, furloughed or laid off large portions of their workforce, making it difficult to obtain the guidance and support owners need. CONTINUE READING →

Published on:

24 January 2020

If you’re planning to attend the 2020 ALIS conference next week, we’d like to hear from you! Our Global Hospitality Group® attorneys are ready to discuss:

  • Successful hotel purchase strategies
  • Getting a great hotel management agreement
  • Optimizing your financing structure
  • Avoiding regulatory pitfalls in 2020
  • How to protect your company and comply with new cybersecurity regulations
  • Hotel industry litigation issues

Please contact us if you’d like to get in touch during the conference:

jim-150x150Jim Butler
Partner, Chairman
Global Hospitality Group®
310.201.3526
JButler@jmbm.com
guy-150x150Guy Maisnik
Partner, Vice Chair
Global Hospitality Group®
310.201.3588
MGM@jmbm.com
david-150x150David A. Sudeck
Partner
310.201.3518
DSudeck@jmbm.com
bob-150x150Robert E. Braun
Partner
310.785.5331
RBraun@jmbm.com
jeff-150x150Jeffrey T. Myers
Partner
310.201.3525
JMyers@jmbm.com
mark-150x150Mark S. Adams
Partner
949.623.7230
MarkAdams@jmbm.com
Published on:

15 February 2019

$87 billion in hotel transactions involving more than 3,900 properties
LOS ANGELES—The hotel lawyers of JMBM’s Global Hospitality Group® are pleased to present their updated Hospitality Credentials, which include clients and projects that represent more than $87 billion in hotel transaction experience involving more than 3,900 properties worldwide – more than any other law firm.

“If you are a hotel owner, developer, or capital provider, our hospitality lawyers can provide expertise and experience you just won’t find elsewhere,” said Jim Butler, Chairman of JMBM’s Global Hospitality Group. “Whether you are buying or selling a hotel, developing a new one, need a privacy and cybersecurity plan, or defend an ADA lawsuit – we have lawyers who know the ropes, and can guide you every step of the way.”

JMBM’s Global Hospitality Group provides a full range of services to the hospitality industry including:

  • ADA compliance & defense
  • Cannabis
  • Celebrity chef agreements
  • Construction
  • Corporate governance
  • Cybersecurity
  • Data privacy
  • Development
  • Equity & joint ventures
  • Expert witness
  • Fiduciary duty
  • Financing
  • Foreign investment
  • Franchise & licensing
  • Hotel-specific contracts
  • Labor & employment
  • Land use & environmental
  • Leasing
  • Litigation
  • Management agreements
  • Mergers & Acquisitions
  • Opportunity Zone
  • Proposition 65
  • Purchase & sale
  • Shareholder disputes
  • Tax
  • Trademark & copyright
  • Trusts and estates
  • Union negotiations
  • Union prevention
  • Vacation ownership
  • Workouts, bankruptcies & receiverships
“Exceeding $87 billion in hotel transactions involving 3,900 properties is a new milestone, and one I am proud to announce,” said Butler. “I am grateful to all of our wonderful hospitality clients who have shown us their trust and confidence over the years and continue to provide us with challenging and meaningful work.”

About JMBM’s Global Hospitality Group
JMBM’s Global Hospitality Group is the premier hospitality practice in a full-service law firm and the most experienced legal and advisory team in the industry. The Group publishes the Hotel Law Blog and hosts the annual Meet the Money® National Hotel Finance & Investment Conference (May 6-9, 2019 in Los Angeles). For more information visit www.HotelLawyer.com.

Contact:

Jim Butler
jbutler@jmbm.com
+1 310-201-3526

Published on:

Chinese-Photo-1-2

Recently, a Chinese government delegation visited Jeffer Mangels Butler & Mitchell LLP.  The delegation included some of the highest-ranking officials from a top Chinese government agency – “China State Administration of Foreign Exchange” – an agency that directly oversees the investment of $3 trillion of China’s foreign reserve. CONTINUE READING →

Published on:

 
9 October 2017

It is budget season again — that time when operators and owners sit down to agree on the financial blueprint for the next year. My partner Bob Braun has worked on many hundreds of hotel management agreements and issues arising under them. Today, he shares some insights about the how to maximize the budget opportunity for constructive dialog between owners and operators.

It’s Budget Season
What are you doing about it?
by
Robert E. Braun, Hotel Lawyer

Importance of budgets

It’s hard to overstate the importance of a budget in the relationship between a hotel manager and owner. The budget is the way that a manager describes, in black and white, how it plans to operate the owner’s property; it is the document that translates operating standards into action, and how the owner can expect to profit from the manager’s efforts. It is also an important opportunity to be sure that the operator is giving due consideration to the owner’s financial expectations and/or exit strategies.

Many of the larger independent management companies present a budget with little opportunity for dialog. In significant part, they diminish the direct impact of asset and property management teams. This means people sitting in an office 3,000 miles away make key budget decisions for properties that they have not seen or on markets they have not visited, based on STR reports and raw data. Generally, one would think that the property-level asset management team would be the best to guide the budget process because of their hands-on knowledge – not the corporate budgeting team.

Budget challenges owners face

Unless owners have a wealth of operating experience or hire experienced asset managers, they will likely be at a severe disadvantage when they review budgets. Consider typical challenges of the budget timing and process:

  • Managers typically deliver budgets to owners in early- to mid-November, which leaves only 45 to 60 days before the beginning of the new fiscal year. While an owner may be able to analyze and comment on the budget and propose changes, the process itself is lengthy and makes it difficult to complete in a timely manner. Operators have scheduling conflicts during that busy period, and typically take two to three weeks, or more, to prepare a response for the owner’s review. Managers work on budgets almost year-round, and larger management companies have staffs that are dedicated solely to creating budgets. They have developed expertise in creating a budget that owners can only match by expending the necessary time and expertise, which takes a commitment that many owners don’t understand; after all, didn’t they already engage a manager for its expertise?
  • No matter the level of owner approval rights – which range from what might be complete control to very limited influence – managers run the budget process and establish the assumptions underlying the budget, making it difficult to make changes. Leveling the playing field requires owners to engage asset managers to conduct a “shadow” budgeting process.
  • The budget for any single year will impact budgets for years to come. While budgets are generally “zero-based,” a budget for any given year is more realistically derived from the budget for the prior year, and budgets ultimately contain a variety of “legacy” items. While the old budget should, reasonably, provide a setting for the new budget, a variety of factors should (but often don’t) get adequate consideration, including new labor agreements or laws, renovations and their implications, new supply, addition of new product internally (such as restaurants or bars), and outside influences, such as changes in the convention market and other drivers for the hotel market.
  • Operators rarely provide great detail on the most significant cost to owners – labor expenses – and therefore do not give owners the opportunity to identify potential savings. Similarly, operators often give greater weight to occupancy than rate, which may actually reduce the profitability of a hotel.

CONTINUE READING →

Published on:

7 November 2016

Hotel Lawyer on multi-branded hotels.

Hotels with more than one brand are increasingly common, but it wasn’t always so. Although some compelling advantages are driving this trend in many situations, developers and owners should weigh the advantages against other considerations.

My partner Bob Braun is a senior member of our Global Hospitality Group® and has experience with many hundreds of hotel management and franchise agreements. Bob is also co-author of the Hotel Management Agreement & Franchise Agreement Handbook (3rd edition), and has first-hand experience with branding and management for every major traditional hotel brand, including a number of multi-branded properties. Today he explores the phenomenon in greater detail.
Dual-branded & multi-branded hotels:
Opportunities and challenges
by
Bob Braun, Hotel Lawyer

The trend of dual-branded and multi-branded hotels

Over the past few years, the popularity of multi-branded properties has exploded. Less than a decade ago, a dual-branded hotel was an oddity. Then dual branding became more common, and some properties began to use more than two brands, so “multi-branding” was born in the hotel industry. In the early days, multi-branding resulted from unique circumstances. Today, it is driven by a number of factors discussed below, and there are nearly 100 properties with multiple brands and nearly that many again in construction. CONTINUE READING →

Published on:

21 September 2016

Have you noticed the explosion of new brands from hotel companies over the past few years? At JMBM, we do a lot of work with branding through license agreements, management agreements and other arrangements. So we asked my partner Bob Braun to give us some insights on what this is all about and what significance it has.

Here are Bob’s thoughts, along with some practical advice on what owners and developers should do in this situation.
Hotels – Brand Expansion or Brand Explosion?
by
Bob Braun, Hotel Lawyer

Consumer oriented companies commonly use “brand extension” to launch a new product by using an existing brand name on a new or related product, often in a different category. These companies use brand extension to leverage their existing customer base and brand loyalty to increase profits with a new product offering. CONTINUE READING →

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