With nearly three-quarters 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 hotelare 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 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 acomes into play.
Think of it as wanting to secure the appearance of Frankie Valli & 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 is a group of twentysomethings who bear little resemblance to the original performers. You might be disappointed that, while they sound similar, they're certainly not the real thing.
Doing Business As…
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 was not with Hyatt Corp., but with West Genesee Hotel Associates, for which Hyatt was 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 might 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. Hotel employees' paychecks often bear the legal name of the management company or party responsible for operating the hotel. Reflecting the proper legal name in a contract is sound business and legal practice, and it can be significant if the hotel's brand affiliation changes. In that instance, the contract is generally assigned or transferred to the new operator.
Contracts, like checks, 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 upon language in the contract.
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 its responsibilities. Thus, in lieu of canceling a meeting and assuming a large cancellation fee, some planners “shop” their contract to see if another organization is interested in taking over its 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 do so.
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.