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In this economy, many owners are turning to a lawyer and hotel motel consultant about canceling the management agreement when the hotel or resort is not performing according to plan. Worse, is if whatever gain is realized only benefits the operator, which can be the case if they have not invested any of their own money into the project or the brand is considered a weak performer in the marketplace. However, this is always easier said than done and terminating hotel or resort management services can be a costly and lengthy process. Here are some recent cases and court rulings on the subject: On the Turnberry v. Fairmont case, a decision which favored the owner was rendered this week. “According to Jim Butler with JMBM’s Global Hospitality Group®, who represented the owner – 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.” Attorneys, owners and their hotel motel consultant can find the judge’s decision here. In the case involving the M Edition in Hawaii, the owners terminated the contract and installed new management without the operators consent. Then, a judge ruled that the operator should be reinstated, but a bankruptcy filing precluded this action as well. Now with the reorganization, the case is in limbo. More on this story and the hotel resort management company termination. In addition to the legal ramifications of terminating a management company, especially one that is a major brand, are the effects concerning the marketing viability of a project. Three questions you as an investor or owner should ask and answer from a hotel motel consultant perspective are: 1) Do long term returns justify the short term impact? 2) Will the hotel or resort under a different brand or as an independent operate and perform equally? And, 3) How likely is it you will prevail in court? We suggest hiring good legal counsel too.
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