In the Headlines
November 29, 2011

Economic Woes To Spur More Hotel Contract Disputes

With the hospitality industry still struggling to recover from the economic downturn, the article reports that experts like Mr. Guay say we can expect to see more clashes over management agreements between hotel owners and the branded operators responsible for running the hotels. While owners and operators often enter into hotel management contracts that can last several decades, concerns over declining profitability and alleged mismanagement at hotels have prompted several owners to try to get out of these lengthy arrangements with hotel chain operators and usher in new management. According to Mr. Guay, the potential rise in litigation and arbitration proceedings over the termination of hotel management agreements could end up weakening the overall business relationships between owners and operators, and district courts and arbitrators should prevent owners from using a legal loophole like the agency relationship to let them out of a management agreement. “If courts undo contracts involving sophisticated parties who fully understand what their rights and obligations are by allowing a loophole to undercut highly negotiated contracts, I think that’s inherently unfair,” he said.

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