With nearly three-fourths of all hotels in the United States operating as franchises and most hotel buildings owned by someone other than the hotel operator, planners rarely know the party they are actually dealing with when they sign agreements for sleeping rooms and meeting space.

That's because the vast majority of all hotel contracts are presented in the “flag name” of the property — that is, the name that's over the hotel's front door.

Flag names can be misleading because they don't really convey if, for example, a Marriott property is a “real” Marriott or one operated by another entity. And with the active real estate market causing brand owners to sell many hotel buildings, the issue of whether the building owner is a party to a contract comes into play.

Think of it as wanting to secure the appearance of Frankie Valli and The Four Seasons, the singing group that's still touring more than four decades after its first hit. Frankie is still performing, but the current “Four Seasons” are a group of twentysomethings who bear little resemblance to the original performers. You may be disappointed that, while they sound similar, they're certainly not the real thing.

Not Really a Hyatt

So when you book a meeting with a hotel going by the name Hyatt Regency Buffalo, with whom are you signing a contract?

There is no legal entity by the name of Hyatt Regency Buffalo, as one meeting planner found out during a dispute with that hotel. That was what lawyers call a “dba” or “doing business as” name. Contracts at the time were signed by “Hyatt Corporation, as agent of West Genesee Hotel Associates, a New York Limited Partnership, d/b/a Hyatt Regency Buffalo.”

That signature discloses that the planner's agreement is not with Hyatt Corp., but with West Genesee Hotel Associates, for which Hyatt is acting as agent. That limited partnership is most likely the owner of the hotel, but the names of the partnership's participants and their percentage interests may not be easily ascertained.

Who pays the bills?

How does a planner find out the proper legal name of the other party to the meeting contract? Ask the sales representative or someone in the hotel's accounting department. Frequently, hotel employees' paychecks will bear the proper legal name of the management company or party responsible for operating the hotel.

Reflecting the proper legal name of a party to a contract is not only sound business and legal practice, but it can also be significant if the hotel manager or brand affiliation changes. In that instance, the meeting contract is generally assigned or transferred to the new operator, which bases its acquisition price partially on the amount of future business on the books.

Contracts are what the law calls “negotiable instruments”; that is, one party can assign its rights and responsibilities to another. Whether the consent of the nonassigning party to the contract is required, whether that consent may be arbitrarily withheld (or withheld only for a sound business reason), and whether the assigning party remains liable for the contract's performance all depend on contract language.

In most meeting contracts, there is no language regarding assignment, so not only is the hotel free to assign its rights to a new hotel operator, but the planner is also free to assign his or her responsibilities to another party. Thus, in lieu of canceling a meeting and assuming a large cancellation fee, some planners “shop” their contract to see if another organization is interesting in taking over the sleeping room and meeting space obligations.

Hotels often aren't happy when a planner tries to assign a contractual obligation, but in the absence of language prohibiting it or requiring it only with the hotel's consent, planners are within their legal rights to seek another party to assume their contractual responsibilities.

James M. Goldberg is a principal in the Washington, D.C., law firm of Goldberg & Associates PLLC. His practice focuses on representing associations, corporations, and independent meeting planners. He is the author of The Meeting Planner's Legal Handbook.

---

Related Articles:
For more free legal advice, visit our Law/Contracts section.