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Published on:

 
12 October 2017
Click here for the latest articles on Resort Fee Litigation.

Note: If you are a consumer with a Resort Fee issue, please do NOT contact us! We do not represent consumers with complaints against hotels. We are part of the fabric of the hotel industry and are committed to informing, educating and assisting players in the hotel industry.

What does the FTC say is your potential liability for mandatory hotel charges?

In evaluating what you should do about the new furor over mandatory hotel charges, it would be helpful to have a clearer understanding of what the FTC seems to be saying on the issue. The chart below is our translation into “street English” of the FTC pronouncements discussed earlier. (See How Resort Fees became an explosive $2.7 billion issue which contains links to the original FTC press release of November 29, 2012 and the most recent FTC Economic Analysis of Hotel Resort Fees of January 2017.)

We believe we understand what the FTC is saying. We may not agree with it. We do not know whether the Trump administration will rein in the FTC on its perceived mission regarding resort fees, and we do not know whether the current FTC position will be upheld as a valid interpretation of the law. However, courts normally accord great deference to the interpretation of agencies charged with administering their laws, and it is imprudent to ignore the FTC’s recent actions.

In weighing options, even if they ultimately win on legal issues, hoteliers should also consider the negative effects of litigation — including direct costs in terms of legal fees, senior management time, and good will. And there are a number of worrisome plaintiffs who may pursue the issue, including the FTC, State Attorneys General, other governmental and consumer groups, and class action plaintiffs’ lawyers. Any victories by the hotel industry may be largely offset by the costs to obtain them.

So what are your options on mandatory Resort Fees?

The basic thrust of the actions by the FTC, the investigation by the State Attorneys General and most consumer class action suits is that it is a deceptive and misleading business practice for hotels to advertise their room rate online unless the first and most prominent price given includes all mandatory Resort Fees and other charges. They say that it is not sufficient to give the room rate and then have a less prominent disclosure of additional charges. CONTINUE READING →

Published on:

 
06 October 2017
Click here for the latest articles on Resort Fee Litigation.

Note: If you are a consumer with a Resort Fee issue, please do NOT contact us! We do not represent consumers with complaints against hotels. We are part of the fabric of the hotel industry and are committed to informing, educating and assisting players in the hotel industry.

Resort Fees are a $2.7 billion issue — a juicy target for Federal and State governments as well as plaintiffs’ lawyers

It is very likely that the Resort Fee issue will present challenges in the near future to all stakeholders in the hospitality industry. The prior articles in this series talked about what Resort Fees are, and key developments that warn of an eruption of government and private claims over Resort Fees.

This article provides a brief history of how Resort Fees have grown to be a $2.7 billion a year issue in an emotionally charged dispute between antagonists. We think this background is important for the correct analysis of problems and solutions involved with Resort Fees.

Dangerous misconception about drip pricing for Resort Fees

The emergence of Resort Fees and the government’s failure to take action for many years has apparently led to a dangerous misconception, at least in light of fast-unfolding events. This misconception is that it is OK to advertise room rates (without the Resort Fee) on your website, as long as the Resort Fee is disclosed somewhere — in the fine print or otherwise — before the consumer books the purchase. Some would argue that this was never OK, but recent developments make this a perilous position. This is not OK according to the FTC 2017 Report and other consumer groups. (see the previous article regarding the eruption of government and private claims over Resort Fees)

Early rumblings.

Hotels have charged various service fees for decades. We found references to Resort Fees in 1997. In 2001, a class action lawsuit was filed against Hilton, Hyatt, and Starwood for imposing mandatory “energy surcharges” to guest bills. In 2006, Wyndham settled an action by the Florida Attorney General over undisclosed automatic surcharges under investigation since 2001. In 2012, the FTC took a series of actions described below in response to consumer complaints of mandatory fees and drip pricing.

Big tremors.

On November 28, 2012, the FTC published a press release about a formal warning it had issued to 22 hotel operators notifying them that their pricing may violate section 5 of the FTC Act as fraudulent, deceptive and misleading business practices. The warning letter noted that price quotes for room rates without mandatory fees sometimes had footnotes or separate disclosure of the additional fees, but suggested that this treatment might be inadequate. The letter said, “These practices may violate the law by misrepresenting the price consumers can expect to pay for their hotel rooms.” CONTINUE READING →

Published on:

 
03 October 2017
Click here for the latest articles on Resort Fee Litigation.

Note: If you are a consumer with a Resort Fee issue, please do NOT contact us! We do not represent consumers with complaints against hotels. We are part of the fabric of the hotel industry and are committed to informing, educating and assisting players in the hotel industry.

Resort Fees: It is not just the FTC. Now there are 47 Attorneys General focused going after perceived abuses of Resort Fees

Consumer complaints have been protesting Resort Fees for almost two decades. In 2012, the FTC took its first major action. The hotel industry took some action, but many consumer groups and regulators apparently don’t think it is enough.

In May 2016, a national investigation was initiated by the Attorneys General of 46 states and the District of Columbia as to whether DC’s Consumer Protection Procedures Act (the “CPPA”) and similar acts of other states have been violated by deceptive price advertising techniques related to drip pricing regarding Resort Fees.

On June 7, 2017, the Attorney General for the District of Columbia (joined by the other 46 states) filed an action against Marriott to enforce subpoenas related to this investigation, and we are now aware that a number of owners, operators, and brands are receiving subpoenas or inquiries from other State Attorneys General relating to this task force’s nationwide investigation.

The rhetoric in the papers filed by the DC Attorney General is predictable: The FTC issued warnings about drip pricing in the hotel industry in 2012. Despite national criticism of the practice and consumer complaints, it appears the practices have continued.

Click here to read the papers in the lawsuit in DC v Marriott filed June 7, 2017.

What is your action plan for compliance and defense of Resort Fee litigation?

If you don’t have an action plan now, you should get started before you are served with a subpoena or complaint. We expect a flurry in the near future and are already assisting clients in dealing with a broad range of Resort Fee strategies and assessments.

Why do something NOW? Here is why. This is serious! CONTINUE READING →

Published on:

 
29 September 2017
Click here for the latest articles on Resort Fee Litigation.

Note: If you are a consumer with a Resort Fee issue, please do NOT contact us! We do not represent consumers with complaints against hotels. We are part of the fabric of the hotel industry and are committed to informing, educating and assisting players in the hotel industry.

Impending eruption of government and private litigation over Resort Fees (mandatory service fees). Big shaking again. Is this the big one?

Two significant developments may signal an eruption of government and private claims over Resort Fees — (1) publication of the FTC 2017 Report and (2) commencement of proceedings regarding Resort Fees by a national task force of Attorneys General for 46 states plus the District of Columbia. This article focuses on the FTC Report. The next article will discuss the national task force.

The FTC issues its 2017 Report on Resort Fees

In January 2017, the FTC’s Bureau of Economics published a 44-page report entitled “Economic Analysis of Hotel Resort Fees” (the “FTC 2017 Report” or the “Report”).

The Report sets forth an aggressive regulatory position suggesting that it is a deceptive and misleading practice to advertise hotel rates without including Resort Fees, unless the total price (with Resort Fees) is the first and most prominently displayed price (in position and font characteristics) so consumers can easily comparison shop. It is not enough to disclose Resort Fees after the “room only” price even if this disclosure is made prior to booking a room. However, once the all-inclusive price has been disclosed, it is permissible to give a breakout of the total price into Resort Fee and other components.

The Report finds that “separating mandatory resort fees from posted room rates without first disclosing the total price is likely to harm consumers by increasing the search costs and cognitive costs of finding and choosing hotel accommodations.” The Report also finds that this drip pricing approach is unlikely to result in any benefits to offset the harm to consumers. Apparently, the Report’s authors find that the harm to consumers who may incur greater search costs and/or make incompletely informed decisions (and pay more for a room) justifies damages or enforcement actions under section 5 of the FTC Act.

Some highlights from the FTC 2017 Report

Here are some bullet point highlights extracted from the Report. CONTINUE READING →

Published on:

 
25 September 2017
Click here for the latest articles on Resort Fee Litigation. 

Note: If you are a consumer with a Resort Fee issue, please do NOT contact us! We do not represent consumers with complaints against hotels. We are part of the fabric of the hotel industry and are committed to informing, educating and assisting players in the hotel industry.

Impending eruption of government and private litigation over Resort Fees (mandatory service fees) 

There were earthquakes and tremblors for at least 17 years before Pompeii was destroyed in the catastrophic eruption of Mount Vesuvius in 79 AD.  The past is prelude.

What are Resort Fees?

We define “Resort Fees” as any mandatory fees or surcharges to hotel guests that are not included in the stated price of the room. These Resort Fees are usually described as covering a bundle of services, facilities or amenities, but the key element is that these charges are not optional and do not depend upon whether a guest actually uses of any of bundle’s benefits.

The FTC has described Resort Fees as part of one subset of a bigger problem involving two pricing practices: partitioned pricing and drip pricing. According to the FTC’s January 2017 Economic Analysis of Hotel Resort Fees, “Partitioned pricing involves dividing the price into multiple components without disclosing the total. Drip pricing is the practice of advertising only part of the product’s price upfront and revealing additional charges later as consumers go through the buying process.”

What is the Resort Fee issue?

The government is on a mission to eliminate the practice of hotels charging their guests undisclosed Resort Fees, and is going after hotels for massive fines and penalties.

The first warning signs of an explosion of litigation over Resort Fees go back some 17 years to about the year 2000, when Resort Fees began to gain popularity with hotels and started a wave of consumer complaints about mandatory surcharges or other fees automatically added to a guest’s hotel bill. Although mandatory service fees may have different names, the most popular name for them is Resort Fees.

We are accustomed to seeing litigation trends take form quickly, and there is reason to believe that a new pressure is gathering critical force on the Resort Fees issue. We will discuss this serious threat of litigation in detail later. CONTINUE READING →

Published on:

22 December 2014

Click here for the latest articles on Hotel Management Agreements.

A version of this article first appeared in Hotel Business Review in December 2014, and this article is reprinted with permission from www.hotelexecutive.com.

 

The shrinking terms of hotel management agreements

Better bargaining position for hotel owners on HMAs

by

Jim Butler and Mark S. Adams | Hotel Lawyers

The relationship between hotel owners and managers continues to evolve. Hotel management agreements historically were long-term. Fifty to sixty year terms were common. However, in the last few years, hotel owners have successfully negotiated shorter contract durations and other more favorable terms, even from the largest and most sought-after major brands. This trend is likely to continue and expand as brands realize that hotel owners have the power to terminate so-called no cut, long-term hotel management agreements, despite contrary provisions in the contract which courts now routinely ignore as a matter of public policy.

The Separation Of Hotel Ownership From Hotel Operations

Trade, pilgrimage, conquest, and adventure have been the driving forces of travel since ancient times. For more than 5,000 years, accommodations for these travelers were provided by inns or monasteries. These lodging facilities were typically owned and operated by the same persons. That ownership pattern still exists today, particularly among mom-and-pop operations or small chains, but more and more, there is a separation of hotel ownership and hotel management.

This trend first gained traction when Kemmons Wilson started the first hotel franchising of Holiday Inns in the 1950s, and picked up momentum in the next couple of decades when hotel operators decided to move hotel real estate off their balance sheets with sale-leaseback transactions, and when hotel investors bought hotels and elected to lease their hotels to professional hotel operators. The separation of ownership and management continued and became the prevalent structure as hotel management agreements were developed in the 1970s and proliferated in the 1980s, 1990s and 2000s, particularly for larger, higher-end hotel properties.

But in the last ten or 15 years the franchise model has become the dominant one, at least by number of branded rooms, and particularly for the rapidly expanded extended stay and select service segments of the industry. Under this model, ownership is separate from branding, and usually a professional (unbranded) hotel management company is a surrogate for the brand.

Ultimately, the separation of ownership and management brought about by this evolution meant that the traditional hotel companies focused more on finding more owners of hotel real estate that they could brand and manage, and the owners of hotel real estate (lacking hotel brand or management capacity) focused on collecting rents or looking to their brand and operator to optimize profits. In other words, the concept of a hotel being owned by one entity and operated by another became a preferred model, whether under a hotel lease, hotel management agreement or a franchise.

Since the 1990s, when some estimate that 60% of the hotel rooms in the U.S. were unbranded, more owners have elected to brand their hotels to access the professional management, finaceability, marketing power and resources of the brands. Today, unbranded hotel rooms probably comprise less than 20% of the hotel rooms in the U.S. This massive shift to the brands further reinforced the separation of hotel ownership from hotel branding and management.

The separation has been facilitated by the fact that hotel guests do not particularly care who owns the title to the hotel real estate as long as the hotel’s physical facilities and service levels meet their expectations and are predictable, satisfactory, clean and safe. Branding was one way to provide assurances of consistency and meeting minimum brand standards. In this evolving dynamic, brands focused on operations, brand standards, and system expansion.  They were less capital-constrained because owners now provide the bulk of capital to build and maintain hotel real estate and related facilities.

The Hotel Management Agreement (“HMA”)

The HMA is one of the clearest separations of ownership and operation. A branded HMA with one of the traditional hotel management companies is typically a long-term agreement between the owner and operator under which the operator is delegated virtual control over the operations of the hotel. The principal provisions in an HMA are, as follows: CONTINUE READING →

Published on:

17 July 2012

Hotels and restaurants are among many other businesses that monitor employees at work through video surveillance, and through employees’ use of company-issued computers and smart phones. While employers gain benefits such as reducing theft, decreasing liability and ensuring safety procedures are followed, employees can feel that this electronic monitoring violates their privacy. In his article below, Mark Adams, a litigator in JMBM’s Global Hospitality Group®, shares with us how courts are ruling in lawsuits that deal with electronic surveillance of employees. He also gives employers advice on how to prevent these lawsuits from happening.

CONTINUE READING →

Published on:

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Click here for Traditional Chinese /繁體中文

Formation of the Chinese Investment Group™

Jeffer Mangels Butler & Mitchell LLP (JMBM) has announced the formation of the JMBM Chinese Investment Group™ to provide legal and business advice for the specialized needs of Chinese investors and Chinese investment in the United States for hotel, real estate, EB-5 and other U.S. investments. We have a dedicated team with great experience for this kind of work.

Here is more information about how this development might help you. Click here to download a PDF of this announcement about the Chinese Investment Group™.

CONTINUE READING →

Published on:

This document is in Traditional Chinese
Click here for English / 英文版

Click here for Simplified Chinese / 简体中文

華人酒店和房地產投資法律顧問集團™是JMBM’s Global Hospitality Group®中一群致力於酒店及房地產律師所組成的專業律師團隊,專為華人在美投資提供入門諮詢。秉持累積自全球1,300 餘件、總值逾600億美元之酒店物業交易專業知識,以及關於一般房地產交易之深厚經驗,本集團提供法律及商務建議,輔導華人投資人進行明智成功的美國酒店及房地產投資。本集團及其可靠專業資源網路,協助華人投資人開發、分析、評估、確認、收購、融資與管理酒店及房地產投資機會。本集團不收取任何仲介費用、獎勵費用、佣金或任何推廣商之付款,並對華人投資者就所有酒店及房地產投資機會提供中立建議。本集團亦代表優質酒店、餐廳及其他房地產業主和開發商為外國投資人,特別是華人投資人,規劃EB-5簽證計畫之投資方案。
代表性客戶及酒店
JMBM長期為如麗晶酒店集團、迪士尼假期俱樂部、Hillwood開發(Ross Perot, Jr.)、米高梅幻象、川普集團及達拉斯市等知名客戶服務。JMBM之銀行客戶包括遠東國民銀行、華美銀行、匯豐銀行、德國北方銀行、瑞典銀行、加州聯合銀行及富國銀行。 JMBM客戶一包含全球眾多酒店開發商及業主,包括美國之W酒店及麗池卡爾登複合用途計畫之最大開發商及業主 。
二十餘年來,JMBM Global Hospitality Group®專致於服務酒店業主、投資者、開發商與借款人。持續與各大酒店品牌及副牌合作,從福朋和假日酒店到萬豪、希爾頓和喜萊登等六十餘家品牌,亦包括費爾蒙、麗池卡爾登、麗晶、 萬麗、洲際、四季及東方文華等高級酒店品牌。

CONTINUE READING →

Published on:

This document is in Simplified Chinese
Click here for English / 英文版

Click here for Traditional Chinese /繁體中文

华人酒店和房地产投资法律顾问集团™ 是JMBM’s Global Hospitality Group® 中一支致力于酒店和房地产项目的专业律师团队,专为华人在美国的投资提供门户。通过使用从超过600亿美元酒店交易中获得的专业知识(涉及全球范围内超过1300处物业),以及在一般房地产交易中积累的大量经验,集团向华人投资者提供法律和商业方面的建议,以帮助其做出在美国的谨慎且具有经济效益的酒店和房地产投资。集团及其可靠的专业资源网络帮助华人投资者识别、分析、评估、估价、获取、资助和管理酒店和房地产机遇。集团并不向任何开发方收取任何中间人费用、奖励费、佣金或付款,并且会向华人投资者提供关于酒店或房地产机遇方面的独立建议。集团也在外国投资者—-特别是华人投资者—-的结构性投资中(利用EB-5签证项目)代表我们所选择的酒店、饭店和其他房地产所有人和开发方。
代表性客户和酒店
JMBM与一些知名的客户具有很长的合作历史了,例如 Regent Hospitality Group、迪士尼度假俱乐部、Hillwood Development (Ross Perot, Jr.)、美高梅金殿梦幻、The Trump Organization和达拉斯之城。JMBM的银行客户包括远东国民银行、华美银行、汇丰银行、德国北方银行有限公司、瑞典银行、加利福尼亚联合银行和富国银行。JMBM也在全球范围内代表很多酒店开发商和业主,包括美国W Hotels and Ritz-Carlton混合使用项目的最大的开发商和业主。
在过去的20多年中,JMBM Global Hospitality Group®专注于服务酒店业主、投资方、开发方和贷方。他们定期与所有主要的酒店品牌及其分品牌合作,例如,从福朋和假日酒店到万豪国际、希尔顿和喜来登,总计超过60个品牌,其中不乏一些高端品牌,例如:费尔蒙、丽嘉、丽晶、万丽、洲际大酒店、四季和东方文华酒店。

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