Of all the topics among hospitality industry attorneys, mixed-use developments and their complexities appear to be among the hottest issues, according to members of an NYU Hospitality Industry Investment Conference panel called “Hospitality Legal Eagles.” The conference is scheduled for June 3-5 at New York’s Marriot Marquis Hotel.

“Almost every deal I’m currently working on has a mixed-use aspect to it, primarily some sort of residential component in association with the hotel,” said Gregory Shean, partner at San Francisco-based Farella, Braun + Martel LLP. “Mixed-use development and the way it has become the standard for a lot of new developments is the leading issue in terms of how to structure and incentivize deals.”

The deals are more complex and the number of players involved is increasing, he said.

In urban city centers, Shean sees mixed-use developments with a residential complex associated with a hotel, often luxury condos on top of the hotel, providing amenities such as a gym and room service to condo owners for an additional fee. In some developments, owned condominiums are added to the hotel’s available inventory when not in use by the owner.

Although he believes mixed-use development is the wave of the future, Shean cautioned that such deals can be complex.

“The way management deals are structured creates a host of accounting and reporting issues” that many smaller operators might not be equipped to contend with, he said.

William Brewer III, co-founder and co-managing partner of Dallas-based Bickel & Brewer, perceives condo-hotels as a way to finance and sell hotel rooms, but expects to see more securities litigation as a result.

“You’re essentially selling securities when you’re selling hotel rooms—they’re investments—and the typical hospitality lawyer hasn’t paid attention to securities issues,” he said.

Carl Lee, partner in Akin, Gump, Strauss, Hauer & Feld LLP of Dallas, believes attorneys are concerned about compliance.

“Are people really doing what’s necessary to be exempt from securities laws?” he said.

Are they following the rules regarding not discussing condo-hotels as investments? Has the condo-hotel’s sales staff been fully briefed and trained to assure compliance with securities regulations?

He also brought up concerns regarding what happens when additional capital must be put into a project. Who will be the target of lawsuits and who ultimately will be responsible? As a result of the potential claims they could face, Lee has heard that some major brands might no longer be participating in condo-hotel projects.

Another hot topic this year is resort fees and assurances of voluntary compliance agreements in Florida, said Michael Sullivan, co-chair of the hotel and resorts practice group at Greenberg Traurig in Orlando. Sullivan said PricewaterhouseCoopers reported $1.6 billion of resort fee volume in 2006, which is expected to rise despite the two-year moratorium on resort fees that went into effect during the summer of 2006.

As part of the moratorium, franchisors committed to rescinding resort fees and to communicating the moratorium to their franchisees, with a goal of making franchisor and franchisee quoted rates consistent. Resort fees are not unlawful, Sullivan said, but they must be “conspicuously disclosed” in accordance with state law governing deceptive and unfair trade practices.

However, the policy goals of VCAs in Florida increase the likelihood of misleading hotel charges because franchisors cannot disclose any resort fees, due to the moratorium, while franchisees, which are not bound by the VCAs, are either disclosing resort fees on their own Web sites or not disclosing them at all, Sullivan said. Because third-party Web sites obtain their rate information from the franchisor Web sites, consumers are not being given consistent and accurate total room cost information, he said. The VCAs need to be ammended to permit the resort fees, if they are conspicuously and accurately disclosed on both the franchisor and franchisee Web sites with the total charge calculation.

Sullivan also believes that, if passed, the Employee Free Choice Act of 2007, which addresses unionization, definitely will have implications for the hospitality industry.

“We’re in an upcycle in the hospitality industry,” Brewer said.

During an upcycle, hoteliers and developers initiate legal action over different issues than when the market is in a downcycle.

“When the market is good, no one complains, but when the market turns and condos lose value, owners may look to point the finger at someone,” resulting in the potential for litigation, Shean said.

Information from: www.hotelmotel.com

This entry was posted on Tuesday, June 5th, 2007 at 7:54 am and is filed under Apartments, Condo, Hotel, Real Estate. Tags: Condo Consumer Dallas development finance Florida Hotel Project Hotel Rooms Hotels Inventory Leading Hotel Michael Sullivan New York Orlando PricewaterhouseCoopers Projects Resort San Francisco state law state law governing . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.