Check-in - November 2021

We are delighted to share the November 2021 edition of Check-In, Bird & Bird's quarterly newsletter for hotel, hospitality & leisure businesses.

The newsletter focuses on hot topics and legal developments impacting on various aspects of the sector around the globe. In this edition we are pleased to share our new Tier 1 ranking for Hospitality & Leisure in Legal 500, as well as a number of industry updates from across our international offices.

We also continue our two regular features: HMA Bites, where Associate James Fowler explores a different aspect of hotel management agreements in each edition, and Employment Corner, where Partner Alison Dixon and Associate Stephanie Creed share a summary of the latest employment law updates for hotel, hospitality & leisure businesses. In addition to HMA Bites and Employment Corner, we are pleased to introduce a new regular feature: Construction Columns, where Partner Andrea Chao looks into the various trends, opportunities and challenges facing the construction and development of hotels.

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, Hospitality & Leisure team.

• HMA Bites
• Employment Corner
• Construction Columns
• Corporate
• Dispute Resolution
• Spotlight on Venice
• News & Events

HMA Bites

Assignment and transfer clauses

Welcome to HMA Bites! In each edition of Check-In we will take a concise look at an issue relating to hotel management agreements ("HMAs") and provide insight, tips and advice based on our experience in practice. In this edition, we will be taking a look at assignment and transfer clauses in HMAs.

As with any commercial contract, assignment clauses are a standard (and important) part of an HMA, and future-proof the underlying commercial arrangement by anticipating (and legislating for) exits, sales, restructurings and other events which a party may undergo.

A typical assignment clause in an operator-friendly HMA might read as follows: "The Operator may assign its rights and/or obligations under this Agreement to an Affiliate who has the ability to perform Operator's obligations hereunder, without prior written notice to the Owner."

Often the word "assign" may be replaced or accompanied by words such as "transfer" or "novate" – or may even contain all three. It is easy to think that these words are more or less synonymous, and can therefore be used interchangeably or in combination to the same end. It is also easy to think that these words can apply equally to a party's rights and to its obligations. In some jurisdictions, this is true. But if your HMA is governed by English law, you must choose these words carefully – and your assignment clause must be drafted carefully so as to cater for the appropriate formalities.

Read more >

Employment Corner

COVID-19 and returning to work: What can hotel employers do?

Employers in the hotel sector are facing particular challenges in encouraging staff to return to work. The sector has been one of the most badly affected by COVID, with lockdowns hitting businesses hard. Reopening safely is a priority. Most staff in this sector will need to attend the workplace in person in order to carry out their duties – working from home is simply not possible for the army of housekeeping, catering and other staff that form the backbone of the sector.

One of the key challenges employers in the sector are facing is how to get staff back to work in a way which is safe for them and their customers, whilst also managing sensitive personal data in a legally compliant way. There are pressing employment and data protection issues to be considered when assessing whether it is possible to request information regarding employee vaccine status, to require vaccination for access to workplaces, or even as a condition of employment.

Key questions

With this in mind, we have explored some of the key questions around what employers can and can’t do in our article looking at the position in the UK and our series of cross-border HR Data Essentials guides for COVID-19, including:

• Can we ask employees if they have been vaccinated?
• Can we require employees to be vaccinated as a condition of continuing employment, and what can or should we do if employees refuse?
• Can we require employees to be vaccinated as a condition of physical attendance at the workplace?
• Can we retain the vaccination / test / immunity records of employees?

If an employee refuses a request or requirement for vaccination, asserting medical reasons, can we require proof of the medical reason?

Case law

We have also seen a steady flow of initial decisions from the UK Employment Tribunals relating to legal issues that have arisen as a result of the pandemic.

Whilst the decisions of the first-tier tribunals are not always consistent, and are not binding, they can give us an indication of the direction of travel.

We have looked at some of the key decisions so far:

• Gibson v Lothian Leisure ET/4105009/2020: The Claimant was held by the Employment Tribunal ("ET") to have been automatically unfairly dismissed for raising issues related to health and safety at work during the COVID-19 pandemic
• Accattatis v Fortuna Group (London) Ltd 3307587/2020: The ET held that the dismissal of an employee who had expressed concerns about commuting and working in the office during lockdown and had repeatedly asked to be furloughed was not automatically unfair under section 100(1)(e) of the Employment Rights Act 1996.
• Montanaro v Lansafe Ltd ET/2203148/2020: The ET held that an employee whose workplace was in the UK but who had remained in Italy at the start of the COVID-19 pandemic was automatically unfairly dismissed when his employer dismissed him for unauthorised absence.

Tips and tronc

On 24 September 2021, the UK government published a new statement setting out its plans with regard to the treatment of tips, with the aim of ensuring that all tips go to workers under proposals to overhaul tipping practices.

The government states that it will make it illegal for employers to withhold tips from workers, and asserts that the proposed changes will help around 2 million people working in approximately 190,000 businesses in the hospitality, leisure and services sector. Many of these individuals will be on national minimum wage rates and the addition of tips may have an important impact on their take-home pay. The plans make clear that this includes tips received via card payment.

This is likely to have a significant impact on employers, particularly those who currently choose to keep tips, both in terms of their policies and financial arrangements. Employment claims may arise where the new requirements are not observed, and employers should also anticipate adverse media attention where they fail to comply (with potential knock-on effects for reputation and income).

The publication indicates that new grounds of claim will be created to protect workers where employers fail to comply with their obligations, along with new rights for workers to make a request for information relating to an employer’s tipping record to assist them in pursuing such claims.

The publication does not provide full details of the proposed changes, so employers should watch this space.

Diversity, equality and inclusivity: Ethnic pay gap reporting

Along with broader diversity, equality and inclusivity topics, ethnicity pay gap reporting remains high on the agenda.

A new report by the Runnymede Trust commissioned by the Equality and Human Rights Commission (“EHRC”) has recommended that public sector bodies in England be obliged to report on their ethnicity pay gap every two years. The report states that racism is systemic in England and that the situation of BAME communities has worsened over the last five years, with BAME workers more likely to be in insecure and low-paid work. The report recommends that the UK government should use its powers under Section 153 of the Equality Act 2010 to impose a specific duty on all local and national authorities in England to gather and publish data on their workforce by ethnicity, pay and grade and any measures taken to reduce gaps, as a way to address any discrepancies between experience and qualifications on the one hand, and salary and seniority on the other.

International mobility: Launch of the Workforce of the Future series

Employment, recruitment and resourcing staff in the hotel, hospitality & leisure sector have been affected, directly and indirectly, by developments over the last two years, often in unique and specific ways. It is clear that some of the changes prompted by the COVID-19 pandemic are here to stay and that a series of longer-term trends are transforming how and where we work, and how we communicate and share information. These complex changes will continue to unearth a range of risks – legal, financial, and reputational - never before contemplated or encountered in the modern workplace.

Our new series, the Workforce of the Future, examines some of the hidden risks associated with new and emerging ways of working, which the hotel, hospitality & leisure sector will need to consider carefully given the implications for this field of work. In this series, we bring together a variety of different voices, including legal experts, HR professionals and other contributors to provide their insights on these issues and challenges. We will discuss questions we are talking to our clients about, including:

• Can we allow our employees to work from anywhere in the world?
• What’s the best employment model in order to maintain a flexible workforce, while being compliant and treating our staff well?
• Can we use automated screening of CVs and social media profiles when recruiting new hires?
• How can we show employees that we care, without being criticised for being too political?
• How can we keep our confidential data secure when employee turnover is high and our employees are working remotely?

The first webinar of the series, available here, focuses on issues around alternative employment structures, such as employers of record, working from anywhere, and global mobility issues.

Read more >

Construction Columns

The construction industry is rapidly changing. Now more than ever, challenges can be expected when constructing hotels and other hospitality/leisure assets. Challenges that require solutions. On the other hand, innovations need to be considered as a way to positively distinguish yourself from your competitors, to make asset (re)development a success and to keep up. At the same time, starting a construction project for the first time can be daunting. In the coming editions of Check-In, Construction Columns will touch upon a range of construction-related topics to help improve the success of your construction projects. In this edition we will give a flavour of what you can expect.

When developing or redeveloping hotel and other hospitality/leisure assets, there are several objectives. To be a success, a project must be completed:

• on time
• within budget
• in line with the specifications
• without disputes

These objectives must all be met in order to make such a project a success. The hotel is scheduled to open on a certain date and has already accepted reservations. The purpose of the hotel is to generate a certain revenue and profitability: a budget overrun does not fit well in a sector driven by closely monitored profit margins. Having an asset that does not meet the requirements means that hotel brand requirements are not adhered to which disappoints guests. Disputes are never welcomed, whether it is between the developer and the contractor, between the hotel management and stakeholders, or with tired guests whose stay has been disturbed due to construction works.

In addition, the requirements, expectations and circumstances relevant for successfully building and operating a hotel (as well as other hospitality and leisure assets) are changing. In this article we give five examples of these challenges and risks, as well as some solutions that we will look at in more detail in future editions of Construction Columns.

Read more >

Corporate

Snapshot: European hotels M&A market and deal process

The near freezing of the market in the early days of the pandemic is now firmly in the past. Back then there was a sense that there would be a huge opportunity to buy at distressed prices. In practice, it hasn’t worked out that way, and today’s deals are largely being driven by longer-term trends. In particular, we continue to see push for ongoing consolidation within the industry, and the impact of significant pools of capital looking for a return.

At the same time, uncertainty remains as to the future long-term outlook for, in particular, corporate travel. Against that backdrop, we expect to see parties working hard to agree valuations and, for the moment, a focus on targeted rather than transformational M&A.

Read more >

Dispute Resolution

Hotel arbitration: What, why and how?

As economies rise and grow, the hotel sector is a remarkable indicator both of the current state of development and where investors think it is heading. How many new hotels are being built across a city? How many rooms are coming online in the next 12 months? What brands are the large hotel groups betting on being right for the market over the next decade?

Disputes and dispute resolution are an inevitable part of such development and growth. All the more so when short-term shocks (such as the obvious), put strain on the relationships and financial commitments underpinning that growth.

Read more >

Spotlight on Venice

Venice: The end of 'hit-and-run' tourism?

What will holidays of the future look like in Venice? Two months after Venice banned cruise ships from entering the lagoon, city authorities are seeking to radically change the way people are welcomed to the city. By offering new routes of access into the city, the Municipal Administration is looking to put an end to the ‘hit-and-run tourism’ model it had before the pandemic.

The plan is not to simply limit entry into the city and improve controls, as was originally announced by the Municipal Administration back in 2019, but to implement a wide range of new measures. These measures will include using electronic gates, booking apps and excess charges to be paid by non-residents when visiting Venice. This highly anticipated system of quotas aims to turn Venice into a world capital of sustainability.

Read more >

News & Events

Our UK team celebrates Tier 1 ranking for Hospitality & Leisure in Legal 500 guide

We are delighted that our UK team has achieved a Tier 1 ranking for Hospitality & Leisure in the Legal 500 UK guide for 2022, and is recognised as having a "real understanding of the sector and nuances associated with it." Head of our Hotels, Hospitality & Leisure sector, Karen Friebe, is also ranked as a leading individual. Many thanks to all of our clients for their support and for taking the time to provide feedback of their experience of working with us. The full write-up about our team can be found here.

We speak to Mandarian Oriental and Colliers about sustainability at the Luxury Law Summit Europe

Members of our team recently attended the Luxury Law Summit Europe, which took place at the British Museum in London.

As sponsors of the Summit we were delighted to be part of a fantastic line-up of high profile speakers exploring global trends in luxury. Our panel session, titled “Sustainability, no longer a luxury”, was moderated by Head of our Hotels, Hospitality & Leisure group, Karen Friebe, who was joined by Vincent Marot (Mandarin Oriental Hotel Group) and Ben Godon (Colliers). The panellists discussed how luxury businesses should be prioritising their environmental and social impact to meet consumer expectations and drive growth, and shared how they and those they work with are implementing sustainable policies and practices to re-shape the future of luxury.

The day ended on a high for the Bird & Bird team at the Luxury Law Awards, where we were thrilled to win the Luxury Law Firm of the Year Award in recognition of our leading expertise in this sector. The Awards are judged by ten individuals against a number of criteria, including evidence of legal expertise and innovation, team working, client satisfaction and a commitment to ESG. The judging panel commented on our team’s expertise in tech, our collaborative approach and ability to offer innovative solutions to our clients.

Did you miss our webinar on re-setting the balance sheet?

In the latest webinar in our series with AlixPartners, EP Business in Hospitality and HVS, we were joined by industry experts to look at the balance sheet challenge that many hotel companies will be facing having raised liquidity through debt finance to survive the COVID crisis. Our panel examined the funding support that has been provided and what actions companies should consider in order to ensure balance sheets are fit for recovery.

Watch the webinar here if you missed it.

We contribute to Women in Hospitality Global survey

Head of our Hotels, Hospitality & Leisure group, Karen Friebe, is a leading member of Women in Hospitality (WiH) Global – a not-for-profit community who collaborate to create a hospitality industry which is more diverse and inclusive. The community includes members who build, fund, operate and advise in hospitality across EMEA, APAC and the Americas. WiH has already hosted dozens of panel sessions, initiated a mentoring programme, and partnered with leading global hospitality conferences. Most recently, they have shared the findings of a landmark global survey on women and ethnic minority representation across the hospitality industry, with the aim of highlighting what still needs to be done to achieve greater diversity and inclusion in the hospitality industry. The survey was produced by WiH in partnership with Questex, the leading conference organiser for the hospitality industry, and attracted over 400 responses. Karen played a key role in developing the survey, which can be accessed here.