Articles Posted in How to Terminate Hotel Management Agreements

18 October 2011
Important new court case on terminating hotel management agreements — Fairmont v. Turnberry.

JMBM’s Global Hospitality Group®, together with Dennis Richard of Richard and Richard, represented the owner of the Turnberry Isle Resort & Spa in obtaining a significant decision involving Fairmont Hotels & Resorts. On Friday, October 14, 2011, a Miami Federal District Court denied Fairmont Hotel’s request for a preliminary injunction to be reinstated as the operator of the hotel.

We think this is an interesting and important decision. We believe that this 71-page opinion written by Magistrate Judge Goodman and adopted and reaffirmed by Judge Donald L. Graham is destined to become one of the more important cases in the area of hotel management agreements. Grounded on solid legal precedent — with English common law, a landmark U.S. Supreme Court case by Chief Justice John Marshall, and a well-known line of hotel cases — and public policy, this is one of the best-written, most thoroughly researched and comprehensive decisions in the area.
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28 August 2011

Hotel Lawyer update on Hotel owners terminating hotel operators. This weekend has been a busy one for owners tired of dealing with their branded managers. The Turnberry Group dropped Fairmont on Sunday. See Hotel lawyers on terminating hotel operators: Turnberry Resort drops Fairmont flag.

And on the same day, the owners of the M Edition Waikiki seized control of their hotel from Marriott and installed Aqua Hotels as the new operator. See Marriott Loses Trendy Waikiki Hotel as Owner Changes Locks Overnight as reported by Alexandra Berzon and Kris Hudson of the Wall Street Journal.

Over the years we have spent a lot of time on the subject of getting a great hotel operator and terminating bad ones. Owner discontent seems to erupt when operators continue to deliver disappointing results and ignore owner’s requests to drive the top line and manage costs. Then the operators wonder why owners are upset. See for example “Terminating hotel management agreements when things don’t work” and “How to terminate a hotel management agreement when an operator really deserves it!”
Marriott loses control over half of its trendy Edition Chain in the pre dawn hours of Sunday morning.

The dispute between the owners of the M Edition Waikiki and Marriott has been a contentious and high profile piece of litigation. For the background of this dispute, an outline of what went wrong, and the contentions of the parties, see “M Waikiki’s Edition lawsuit against Marriott and Ian Schrager – an owner’s HMA dispute with Marriott and M Waikiki Edition lawsuit against Marriott – What Marriott’s General Counsel says“.

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28 August 2011

Hotel Lawyer update on Hotel owners terminating hotel operators. Over the years we have spent a lot of time on the subject of getting a great hotel operator and terminating bad ones. Owner discontent seems to erupt when operators continue to deliver disappointing results and ignore owner’s requests to drive the top line and manage costs. Then the operators wonder why owners are upset. See for example “Terminating hotel management agreements when things don’t work” and “How to terminate a hotel management agreement when an operator really deserves it!“.

Turnberry Isle Resort back under founding family’s management and control.

Over the weekend, the owners of the Turnberry Isle Hotel & Resort in Aventura, Florida took control of their hotel and terminated their relationship with Fairmont Hotels.

The resort was created by the Soffer family’s Turnberry Associates in the 1970s, and reacquired in 2006. Turnberry recently completed a $150 million renovation. The hotel had been operated by the Fairmont chain until Sunday, August 28, 2011.

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27 May 2009

Keywords:

Hotel Operating Agreement, HOA, Hotel Management Agreement, HMA, Hotel Management Contract, Management Contract. Hotel Operator, Hotel Manager, Hotel Owner. RFP for Hotel Manager. RFP for Hotel Operator, How to get a great hotel operator.

Terminology

Contracts between hotel owners and managers (or operators) controlling the management of a hotel go by various names. They are called hotel management agreements, HMAs, hotel management contracts or hotel operating agreements. For convenient reference, this article will generally use the term “Hotel Management Agreement” or “HMA.” However all these terms can be used interchangeably and mean the same thing, just as with hotel operator or hotel manager.

Whatever they are called, Hotel Management Agreements allocate risk between the hotel manager and the hotel owner. They are critical in determining the profitability and value of a hotel.

Hospitality Lawyer: Fixing hotel management agreements that don’t work.

What is one of the nicest acknowledgements of professional accomplishment a hotel lawyer might receive? In my book, being recognized by the New York Times as an expert in a core aspect of my legal and advisory practice is pretty close, and that is what happened yesterday in a Times article by Jonathan D. Glater about the increased friction between hotel owners and operators now erupting into litigation in the case of the Four Seasons Aviara and the Fairmont Turnberry.

As I said in another New York Times quote last month by Martha C. White, we are facing the prospect of hotel bankruptcies and foreclosures reaching levels not seen since the last big downturn of the 1990s.

And indeed, it is in difficult times like these when hotels fail to meet debt service — or even operating expenses — that owners and lenders become very frustrated with operators that prefer their own interests to those of the hotel. And that is why Jonathan Glater’s article was looking at two high profile emerging battles where owners are standing up to operators and saying, “I’m mad as hell, and I’m not going to take it anymore.”

Here’s how we see it.

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