When Hotels Change Flags

If you work with or for a hotel, you probably know that they occasionally change owners and brands. Hotels are often attractive targets for real estate investors. And brands change when a management contract expires and the owner chooses not to renew. The result is that an organization booking a meeting several years in advance must consider that the current hotel owner and manager may not still be there when the meeting date comes around.

How can a meeting planner ensure that any ownership or management change does not hurt a future meeting? There are several ways to minimize the potential impact:

Ask When the Management Contract Expires.

Particularly when the meeting is years away, a planner should inquire as to when the management company's agreement expires. If it's before the meeting will take place, it's reasonable for the hotel to provide written assurances that the meeting contract will be upheld in the event of a change in management.

Ask the Owner to Sign a Contract.

The owner's signature on a meeting contract—in addition to the manager's—helps to ensure that a new manager will respect the contract. In the event of a management change, the owner will still be "on the hook" to uphold the contract's terms and perform all contractual obligations.

Include an "Out" Clause if the Hotel is Sold or the Flag Changes.

Planners and hotels often agree to a contract clause providing the meeting organization an "out" in the event of a change in hotel brand or a property sale. This is because hotel selection is often based upon personal taste or brand loyalty. Also, when a hotel is sold or the flag changes, the property sometimes changes significantly. The group's right to cancel acknowledges this possibility, but still allows the group the flexibility to stay if the changes turn out to be favorable.

Place the Deposits in Escrow or a Separate Bank Account. Advance deposits paid by a group are typically commingled with other hotel funds. When a hotel is sold or management changes, the deposit is supposed to be transferred to the new manager, but this doesn't always happen. As a result the group sometimes finds itself without proper credit for amounts paid. To avoid this problem, stipulate in the meeting contract that all advance payments will be put into a separate escrow account for the group's benefit, or at least held by the hotel in a separate bank account. While this creates an extra task for the hotel, it helps ensure that the deposit will be properly retained for the group's use when the meeting dates come around.

Joshua L. Grimes, Esq. is an attorney with a nationwide hospitality practice and is a frequent speaker at meetings industry events. His clients include meeting planners, associations, hotels, convention/conference facilities, and other industry suppliers. Mr. Grimes may be reached at[email protected]or (215) 772-5070. Please see his Web site:www.grimeslaw.org