Check-in - May 2020

The newsletter focuses on hot topics and legal developments impacting on various aspects of the sector around the globe, including two spotlight articles on COVID-19 which explore the lessons UK hoteliers can learn from China, as well as new operational rules for hotels as Italy enters phase two of lockdown. You can see more of Bird & Bird's regular updates on how to navigate this period of global uncertainty on our dedicated COVID-19 webpage.

At the end of the newsletter, you can also find details of some of our upcoming events and recent news, which we think might be of interest to you and your team.

Please get in touch if you would like to discuss any of the issues raised in these articles, or visit our webpage for more information about Bird & Bird's Hotels & Leisure team.

In this newsletter:

• Spotlight on COVID-19
• Banking
• Employment
• Case updates
• Regulatory
• Tax
• Real Estate
• Competition
• News & Events

Spotlight on COVID-19

The big questions facing UK hoteliers and lessons we can learn from China

The closing of borders, shops and public spaces across the world has taken a heavy toll on the global economy, with China a striking example of the price of lockdown. The global economy has been predicted to contract by as much as 3% in 2020; a worse contraction than during the 2008-2009 recession . The economic impact of lockdown has been felt most sharply in sectors which rely upon physical presence, including, and which will be the focus of this article, the hospitality sector.

Read more>

New operational rules for hotels in Italy

After two months of full lockdown, Italy is slowly starting the so-called "2nd phase", by re-opening activities under strict operational rules.

The debate between central Government, health authority and the regions has been strong and after a previous communication which was rejected as unfeasible by the retail and hotel operators, the Government has agreed to implement a protocol for each sector, the application of which will be under the regional control.

As far as the hotel sector is concerned, while waiting for the opening of the national boundaries, each hotel, of any category, will have to abide to a number of rules from Monday 18th May 2020.

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Banking

The impact of Coronavirus on banking arrangements in the hotel sector

The world-wide disruption caused by the COVID-19 pandemic has created an unprecedented situation for the hotel industry. With much of Europe having entered into a full lock-down as a result of the Coronavirus, most hotels are now closed. Even if hotels are allowed to reopen later this year, it is clear that it will be some time before the hotel industry returns to business as usual.

As hotel owners and funders begin to comprehend the impact on the industry, their businesses and their funding arrangements, we look at the key issues that hotel owners and funders should be considering in the next few weeks and months.

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Employment

Q&A for UK employers in the hotel sector during the COVID-19 pandemic

The outbreak of Novel Coronavirus (COVID-19) has understandably had a huge impact on the hospitality sector, with significant workforce implications. This Q&A tackles some key queries in relation to the management of staff during the pandemic.

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Life after lockdown in the UK: employment considerations for your exit strategy and beyond

In recent weeks, organisations have been adjusting their workforces to respond to these unprecedented times, with huge numbers of businesses grappling with the government's new Coronavirus Job Retention Scheme. Just as many people are starting to get comfortable with the 'new normal', organisations will be planning their lockdown exit strategy and starting to think about what longer-term impact COVID-19 might have on our working lives.

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Case updates

New York Laser Clinic v Naturastudios Limited: English law provided a remedy where there was no contract between the parties

There can be numerous situations where commercial parties in dispute find that either the contract between them will provide no remedy to their disagreement, or that in some scenarios there is no contract at all. The lack of a contract between parties in a dispute may not always be fatal.

In the recent case of New York Laser Clinic v Naturastudios Limited the High Court upheld established principles in a successful claim for damages for a breach of collateral warranty and negligent misstatement confirming that a claimant could obtain damages for the loss of profits it suffered as a result of the breach.

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A salutary reminder of the importance of following internal policies when negotiating purchase agreements by email

As the shift to home working looks like it is here to stay, at least for the next few months, it is more important than ever that employees follow internal policies when negotiating new contracts. In Athena Brands Ltd v Superdrug Stores Plc [2019] EWHC 3503 (Comm), the English Commercial Court handed down a decision granting summary judgment in favour of cosmetics manufacturer Athena Brands Ltd, the Claimant, against Superdrug Stores Plc, the Defendant. The judgment serves as a reminder that a simple exchange of emails is capable of creating binding legal relations. While the Defendant did have policies covering the negotiation of purchase contracts, the relevant employee did not make the Claimant's representative aware of those policies and therefore, on the facts she was entitled to assume that he had the necessary authority to negotiate terms of trade and that he intended to bind the Defendant.

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Regulatory

The fertile business landscape in Myanmar

Myanmar is set to be the new focal point in Asia as its economy experiences robust growth rates. Legislative and economic reforms in recent years coupled with infrastructural improvements have encouraged foreign direct investment. Both legal and extra-legal developments signal that the turn of the decade may be an opportune time for businesses to venture into the Myanmar market.

Major reforms have been rolled out since Myanmar's economic liberalisation in 2011, which are targeted at improving the ease of doing business in the country. This article highlights some of these reforms and the favourable implications for the retail and hospitality industry sectors.

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Tax

New tax rules in Australia relating to OTAs

Until recently, global online travel agencies (OTAs) did not have to add Australian goods and services tax (GST) when processing Australian-based accommodation and hotel bookings on the basis that the merchant service was being provided outside of Australia.

Based on the above, domestic booking platforms claimed that offshore OTAs operated in a more favourable environment as offshore OTAs were able to offer lower prices for the same hotel accommodation.

On 1 July 2019, the Australian government amended the federal tax laws so that OTAs were subject to Australian GST on all Australian hotel reservations.

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HMRC ramps up criminal investigations for failing to prevent the facilitation of tax evasion in the UK

In February HMRC announced that nine businesses were under criminal investigation for failing to prevent the facilitation of tax evasion, with a further 21 businesses across 10 different sectors under review. We are told that the investigations relate to businesses of all sizes, but some are amongst the UK's largest. This is the first time we have been told of the number of businesses actively under investigation for these offences.

So far there have been no prosecutions but this may be about to change. How will this impact upon the hotel industry?

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Real Estate

Legal alternatives for running a hotel business in Spain

In this article we explore the rise of the hotel industry in Spain, where more and more private real estate investors are seeking to acquire hotel assets as an alternative to more mainstream real estate investments.

Many of these investors do not have the capability or the expertise to manage a hotel, and so are looking for agreements with professional operators who have the resources to operate such assets and provide the expected return.

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New proposed law in Italy on short-term leases

In recent months the Italian government has tried to propose a regulation on short term leases of residential properties in order to introduce more rigid rules on people leasing in more than one location.

In particular, the proposal aims to differentiate private individuals leasing only their own flats and/or single rooms, from those (who are often professional operators) leasing more than three flats.

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Restrictions on short-term stay in residential schemes in Australia

The rapid rise in popularity of owners of residential properties providing short-stay holiday letting (STHL) services through Airbnb and other online portals has created a host of new issues in residential schemes and particularly the rights of the owners corporation to regulate and control tenant actions.

The conflict often arises in large apartment complexes between owners who 'host' short-term 'guests' on their properties and the long-term resident owners in the same building. Long-term residents have long expressed concerns of amenities use, noise and security associated with short-term guests. Furthermore, they argue that the frequency of guests increases the wear and tear of common amenities for example due to the damage caused by heavy suitcases – increasing the costs of annual maintenance fees.

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Competition

Brussels fines Melia €6.6 for discriminating against clients based on their residence

As reported in the Spanish press, the European Commission (EC) has imposed a fine of 6,678,000€ on the Spanish hotel group Meliá Hotels for operating with clauses that discriminate between consumers in the European Economic Area according to their place of residence, which violates European competition law.

"The Commission's investigation showed that Meliá had concluded contracts with tour operators that limited active and passive sales of hotel accommodation" the Commission said in a statement.

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News & Events

We welcome real estate and hotel finance specialist, James Salford, to our team in London

Joining from Addleshaw Goddard where he was a partner for 14 years, James specialises in all aspects of real estate and hotel finance. He has extensive experience advising lenders and borrowers at all levels of the debt stack; including senior, mezzanine and preferential equity providers and focuses on reviewing and negotiating hotel operating agreements. With over 20 years’ experience in the sector, directories rank James as one of the leading hotel finance experts in the UK.

James' appointment alongside the recent hire of Peter Nicholson will help develop the group's real estate offering for retail and consumer clients. Both James and Peter will work closely with Karen Friebe, an expert in the hotel space, as well as Mark Abell and Graeme Payne in hotel franchising, and partners in areas such as commercial, IP, trademarks, branding and data protection. The hire of James Salford will significantly expand the firm's real estate finance capabilities whilst strengthening its offering and profile in the hotels space.

Read more >

Join our webinar, "The Road Out - unlocking the potential of the hotel sector"

We are delighted to be co-hosting this lockdown webinar for the hotel sector with HVS and EP Magazine on Wednesday 10 June at 10am BST.

We hope you can join us as the Industry works together to share knowledge and ideas as we find the road to successfully exit this difficult period.

We will be joined by a number of leading figures as guest speakers and panelists covering essential issues concerning F&B, finance & investment, and post lockdown reopening strategies for the hotel sector. We do see opportunities for the sector as well as threats and we aim to explore both.

Click here to RSVP. Dial-in details will be sent to all registered participants a few days in advance.