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Hospitality Posts
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Hospitality Posts (140)

The fast-food industry has fallen prey to coordinated demonstrations by a number of loosely affiliated groups, rallying around wages, benefits and other conditions. The strategy invoked by these so-called “worker centers ” (or “alt-unions”) is not altogether new, and was actually contemplated by unions like the Service Employees International Union (SEIU) years ago. At that time, an internal strategy memo was leaked, at which point the union’s intent to organize fast food restaurants was made public. While these reports were met with alarm on behalf of food establishments and other service-sector employers, little came of the effort, which fizzled out as quickly as it started.

Since then, however, we have seen a rise of the “worker center” concept, which is a grassroots effort designed to conceal the ultimate motives of the organization (i.e., to funnel potential members to its constituent labor unions) by masquerading as a social-rights group. Because these groups do not consider themselves to be “labor organizations,” they have managed
to operate in a shroud of secrecy by avoiding the duty to report their annual finances, while skirting other laws regulating picketing, boycotts, and secondary activity.

The most recent tactics revolve around coordinated one-day walk-outs that have the effect of cloaking participants in limited protection as “strikers,” despite the fact that no labor union is directly involved. These tactics are often accompanied by demands for $15 hourly wage rates (representing more than twice the current minimum), combining the overt efforts of local worker centers with behind-the-scenes support from unions, and other non-profit institutions.
The SEIU has been bankrolling many of these efforts, which should come as no surprise given their end objectives.

While it is difficult to ascertain the origins of this concept, it seems to have risen from the ashes of the “occupy” movement, with which Big Labor flirted for a time before ultimately casting it aside. It also combines elements of the grassroots “working wage” efforts that fueled the early stages of the labor movement, along with more recent drives by migrant worker organizations.

Fueled by the advent of social media, the past few years have seen a proliferation of these groups, which now number over 200 and growing. Given the media attention garnered by their demonstrations, it’s fair to assume that they will continue for the foreseeable future. With union membership figures hovering at their lowest rates since first measured, these tactics may
ultimately be seen as a way out of the quagmire. It’s too early to determine their ultimate objective, but it stands to reason that they hope to accomplish a number of things related to their primary goal of replenishing the historical losses of organized labor.

Ostensibly, the movement (at least as it pertains to fast-food workers) revolves around a desire to drive up hourly wage rates, using economic and media forces as the primary means by which to exert pressure. At present, high turnover rates in the fast-food industry operate as a substantial obstacle to organizing activity, which is typically confined to one establishment at a time for representation purposes. Higher wages presumably mean lower turnover, which in turn
facilitates organizing activity while driving up potential dues revenue.

While it may seem unrealistic, it is fair to assume that the movement has “as a secondary objective” the intent to force vulnerable targets to capitulate by agreeing to neutrality agreements in an effort to avoid further economic pressure. Thus far, name-brand franchisees have been the primary target, but such activities could ultimately extend to smaller independent operations in the fast-food industry, and by extension, to other service sectors as well.

By couching the movement in social terms such as “fairness” and “equality,” the demonstrators are focusing on broad socioeconomic themes. But at the end of the day, the activity is being directed at the employers themselves, and could be utilized to “test the waters” of union sympathy, and ultimately to secure signatures on authorization cards that would be
referred to an actual labor organization. In the meantime, unwary managers could be provoked into singling out those who break rank to join the demonstrators, thereby paving the way for unfair labor practice charges that fuel the underlying organizing effort.

While these tactics remain in their formative stages, they could set the stage for a new grassroots organizing model that extends to other businesses, large and small. Although larger service franchisees would appear to be more vulnerable in the short term, no business is entirely immune. Consequently, this is an appropriate time to consider strategies designed to equip your managers with proactive tools to reduce exposure to such tactics, along with the resources they
need to react effectively if and when such tactics show up at their workplace.

These resources should include step-by-step guidelines for spotting the early warnings signs of organizing activity, and for lawfully but effectively responding to the onset of picketing or other demonstrations. In the meantime, all developments in this area should be closely monitored for potential encroachment on your business. Some are already in the crosshairs.

Your Fisher & Phillips attorneys stand ready to assist with these and other resources
designed to protect your business interests.

Co-authored by Jamie Dervin.

The alcohol licensing process for hotels involves a patchwork of state and local regulation that can be difficult to navigate.  Licensing is often highly localized and variable.  Nevertheless, a hotel executive should have a working knowledge of the legal questions to ask in order to understand the bounds of their existing alcohol license.  After all, the alcohol license provides a valuable source of revenue for the business and offers an avenue to provide amenities to guests that encourage repeat patronage.  Conversely, violations of local regulation can result in costly fines and revocation of existing licenses that affect the profitability and marketability of the property.

Introduction

Anyone who has applied for and obtained an alcohol license for a hotel knows that the process can be arduous.  In addition to filling out paperwork and providing extensive documentation, the application review process can go on for several weeks to several months.  However, once the hotel has secured an alcohol license, this is only the starting point for potential legal pitfalls.  As a hotel executive, it is incumbent upon you understand the boundaries of your alcohol license. 

The alcohol license is after all a valuable asset for the hotel.  Hotel guests expect to be able to purchase and consume alcohol at their convenience within the hotel.  Maintaining an alcohol license allows your hotel to provide this service to guests and can make the difference between whether the hotel’s restaurant and bar are profit centers or liabilities.  Alcohol licenses are also scarce commodities.  State laws often permit local governments to restrict the number of alcohol licenses that may be issued, and hotels are not necessarily exempt from these quotas.  Furthermore, if your hotel exceeds the bounds of the alcohol license, the hotel could face stiff civil penalties, individual employees may face prosecution under state or local law, and you risk the possibility that your license will be revoked or simply not renewed in the future.[1] 

Consequently, once your hotel has obtained an alcohol license, you should be concerned with how to maintain the license without interruption.  The following are common questions that a hotel executive may have regarding his/her hotel’s alcohol license.  

What Is the Scope and Limit of My Existing License?

It varies by permit type and jurisdiction.  Location, location, location… the often repeated real estate mantra is important to remember when considering the bounds of your alcohol license.  Your license does not permit the sale of alcohol throughout the entire hotel and encompassed property.  The alcohol license grants the holder rights within the “licensed premises.”  This term may be defined explicitly in the license, or it may reference state/local definitions.  For example, in South Carolina, “licensed premises” refers to “areas normally used by the licensee to conduct his or her business.”[2]  This definition would not permit the license holder to sell and serve alcohol on sidewalks or the hotel parking lot for special events.[3]  Be aware that your current license may not extend coverage to all areas where you wish to serve alcohol.

Does My Hotel Need Multiple Permits?

Usually.  Most hotels have multiple areas where alcohol will be purchased and consumed by patrons.  Your hotel may have a restaurant that serves alcohol, more than one bar on the hotel property, room service, mini-bars, and even a convenience shop that sells alcohol to guests.  You cannot assume that your license grants you permission to sell and serve alcohol in each of these areas.  Because there is a wide variety of liquor licenses available through your local licensing board, be sure to ask your counsel which permits are applicable to your level of service. 

The City of Chicago’s licensing regime illustrates this point.  A hotel may obtain a “consumption on premises-incidental activity” license to sell alcohol on-site to their guests.  However, because the hotel’s restaurant operates as separate entity, it too must obtain an incidental activity license.[4]  If the hotel wants to sell and serve alcohol on an adjacent outdoor location, it may be required to obtain an “outdoor patio liquor license.”[5]  Additionally, if the hotel operates a separate stand-alone bar, then the hotel may be required to obtain a “tavern license” for that location.  The multitude of permits can be expensive, but it is a necessary cost.  Certainly, jurisdictions have various types of permits available to hotels, but you should be aware that your initial license may not allow you to provide the level of service to your guests that you desire.  

Does My Hotel’s Alcohol License Cover Special Events?

No.  Your hotel may want to serve alcohol at several special events throughout the year.  This will not likely cause any problems if the alcohol is being served on the licensed premises during hours prescribed by the license.  However, your license does not permit you to expand service.  For example, this issue arises when a hotel wants to serve alcohol for a parade, street festival, or holiday celebration.  In preparation for these events, the hotel may erect a temporary tent on the hotel’s lawn or parking lot.  The hotel may also expand the hotel restaurant’s outdoor seating or rope off a service area that extends into the public right of way during a street festival.  The hotel is not authorized to sell alcohol in these areas.  However, you may still obtain a temporary alcohol permit for these special events through your local licensing board.  Consider making all applications for special events licenses at the start of the year because the process may take several weeks or even months to complete.

Additionally, your jurisdiction will likely have a separate class of alcohol license for caterers.[6]  This type of license may be advantageous to your hotel depending on the size of your restaurant’s kitchen and the frequency of events you hold off-site.  Obtaining a caterer liquor license could solve your special events problem and enable your hotel to serve alcohol at off-site wedding receptions and hotel areas not otherwise covered as “licensed premises.”

Am I Required to Serve Food to Be Able to Serve Alcohol?

Generally speaking, yes.  Pursuant to state law, most local ordinances impose food service requirements on hotels to be able to obtain a liquor license.  These requirements are location specific, but typical requirements include: (1) dining room size or seating capacity requirements; (2) minimum daily hours of operation for food service; and (3) that the hotel is equipped with a “sanitary kitchen.”[7]  For example, Tennessee requires hotels with 50 or more guestrooms to have a “sanitary kitchen and seating capacity of at least 75 tables” to be eligible for an alcohol license.[8]  The kitchen size requirement is highly variable across states.  For example, Pennsylvania authorities will grant an “H” class alcohol license to a hotel if it has at least 12 bedrooms for rent and has a kitchen that can host 30 people.[9]  Further complicating matters, some states allow hotels to sell alcohol only during the hours when food service is available.[10]  This requirement does not necessarily apply to full kitchen service.  Depending on the local ordinance or statute, your hotel may be able to satisfy this requirement by serving a limited menu.  Do note that your local ordinance may require that more than pre-made refrigerated food items be available for purchase.

State laws and local ordinances condition renewal of a hotel’s alcohol license on alcohol sales being a true secondary use to the hotel’s main purpose.  Consequently, a hotel and its restaurant may not be eligible for certain licenses if food sales do not constitute a minimum percentage of gross revenue or alcohol sales exceed a set percentage of gross revenue.[11]

Can I Provide Complementary Drinks to Guests?

No.  In general, local licensing authorities do not have the authority to issue alcohol permits that include the distribution of complimentary drinks.[12]  This situation arises when a hotel seeks to provide regular complementary sunset toasts, free welcome drinks to hotel guests, or champagne toasts for special occasions.  In September 2012, a Boston hotel was cited by police and was called to appear before the local licensing board for serving complimentary champagne to its guests. However, do note that state and local laws will generally permit hotels to provide free alcoholic drinks if they are a part of a meal or package.  For example, a hotel could legally provide a New Year’s champagne toast if it was included as a part of a purchased dinner or entertainment package.

Am I Required to Update My License or Obtain a New License Before My Current One Expires?

In some circumstances, yes.  Your hotel has been issued an alcohol license based on a set of fixed circumstances.  Changes in these circumstances may require you to update your alcohol license during the year.  For example, alcohol licenses are often tied to the hotel’s specific floor plans.  The following examples illustrate the types of changes that may require you to contact the local licensing board to update your alcohol license or apply for a new one.

  • •  A change to the dining area:  Update is required.  Construction or renovation that affects the area where alcohol will be served most likely requires the hotel to update its license.  This could include adding dining room space, constructing a dividing wall, or even adding an amenity (like a large gas fireplace) that reduces the dining area’s flood space.
  • •  Change to the kitchen: Update may be required.  Because your alcohol license may be conditioned on having a sanitary and functional kitchen, a change in kitchen layout or a change in major kitchen equipment most likely requires the hotel to update its license.
  • •  Changes to hotel entranceway: Update not required.  This change does not affect the boundaries where alcohol will be served or where food will be prepared.
  • •  Extending the hotel’s bar or changing the service layout: Update is required.
  • •  Remodeling the hotel patio or re-landscaping the patio or hotel’s exterior: Update may be required.  The hotel may need to update its license if the remodeling or landscaping affects the square footage of an area where alcohol is being served or affects access to an area where alcohol will be served.

Your hotel will generally need to resubmit information to the local licensing board upon changes in ownership and management.  For example, the Fort Collins, Colorado liquor licensing ordinance requires the hotel’s general manager to submit a separate registration form in addition to the hotel’s application.[13]  Additionally, the city requires each person with a ten percent stake in the company that applies for the license to submit a registration form. 

Who Owns the Hotel’s Alcohol License?

States often refer to the alcohol license as granting an entity the privilege to sell and pour alcohol rather than creating a right.  Nonetheless, once a license has been issued, it may vest a personal property interest to carry out the activities permitted by the license.[14]  It is important to be aware of state and local regulation regarding the transfer and ownership of the alcohol license.  Generally, the license will be issued to an entity, but it is possible for the license to be issued jointly to the hotel and its owner.  A change in ownership may temporarily suspend your license until the local licensing board allows the license to be transferred to new owners.[15]

My Hotel’s License Is Up for Renewal, What Should I Be Concerned With?

The alcohol license renewal process is highly variable based on local ordinance.  Your local licensing board may only require the licensee to submit an updated application form along with the renewal fee.  However, the licensee may be required to appear before the licensing board for a renewal hearing as a matter of course or to conduct a hearing following a change in ownership or change in circumstance.[16]  You should be aware that these hearings are not perfunctory.  The hearing process may be somewhat adversarial in nature, and the procedure can vary based on location.  Due process must be afforded to the applicant, meaning that the applicant has notice and an opportunity to be heard.  However, your state’s administrative procedures act may not necessarily be incorporated into the renewal proceedings.[17] 

Your counsel should inform you about the burden of proof at the hearing.  For example, some states place the burden of proof on the applicant to make a prima facie case that they are eligible for the license renewal.[18]  This burden of proof often includes “showing a need and desire” for the license in the particular neighborhood and “possession of the premises.”  Community need and desire can be evidenced through written petition and live testimony.  This may be difficult for hotels to obtain since their primary patrons are travelers.  Conversely, residents in the surrounding neighborhood may also be permitted to attend the hearing as parties of interest and may testify that there is no need for the license renewal.  This emphasizes the point that you, as a hotel executive, need to cultivate working relationships with surrounding businesses and community associations in the event that the hotel is called before the local licensing board.

The applicant must also show “possession of the premises.”  This issue arises during rehearing when a hotel holds an alcohol license that encompasses the hotel and the hotel’s restaurant.  If your hotel contracts with another entity to provide food service or to operate the restaurant, you may not be said to possess the entire premises.  For example, an agreement to share the premises would be insufficient to justify renewal of the license as to the restaurant, but an agreement that vests control of the premises with the hotel would evidence possession of the premises.

Conclusion

Hotel executives cannot escape the complex ins and outs of alcohol licensing.  However, there is no reason to fear the application and renewal process or to make assumptions about the limits of your hotel’s existing license.  If you are armed with the right questions, then you can more competently discuss these issues with your legal counsel and local alcohol licensing staff. Ask your legal counsel if you have the appropriate license and see if any of your current practices exceed the boundaries of the hotel’s alcohol license.



[1] See e.g., Chicago Code of Ordinances § 4-60-200 (“Any person violating any of the provisions of this chapter shall be fined not less than $300.00 nor more than $5,000.00 for each offense, except where otherwise specifically provided. A separate and distinct offense shall be held to have been committed each day any person continues to violate any of the provisions hereof.”)

[2] See e.g., S.C. Code Ann. § 61-6-1610(B).

[3] See also Chicago Code of Ordinances § 4-60-010 (specifically excluding sidewalks, public right of ways, or private parking areas from the definition of “premises”).

[4] Chicago Code of Ordinances § 4-60-020(e).

[5] Chicago Code of Ordinances § 4-60-010 et seq.

[6] See e.g., Chicago Code of Ordinances § 4-60-043.

[7] Note that there are exceptions to this general rule.  See e.g. Cal. Bus. & Prof. Code § 23396.1 (creating a special liquor license for “restricted service lodging establishments” that do not have a bona fide eating place on-site).

[8] T.C.A. § 57-4-102(19)(a).

[10] See e.g., A.R.S. § 4-205.02 to -02.

[11] See e.g., Cal. Bus. & Prof. Code § 23396.1 (imposing an alcohol revenue cap of five percent of gross annual revenue); Fort Collins, CO (requirement that hotel-restaurant liquor license requires that food sales constitute at least fifteen percent of gross sales) http://www.fcgov.com/cityclerk/pdf/DR8404NewApplicationChecklist.pdf.

[12] See e.g., S.C. Code Ann. § 61-6-4550.

[14] See e.g., A. D. Jones & Co. v. Parsons, 136 Colo. 434, 439, 319 P.2d 480, 483 (1957) (interpreting C.R.S.A. § 12-47-901). 

[16] For example, a change in floor plan or a change in character of the neighborhood would constitute a change in circumstance.

[17] See e.g., Kurt G. Stiegelmeier, A Primer on Liquor License Application Hearings in Colorado, Colo. Law., Sept. 2002.

[18] Id.

 

The first “real” hoteliers I ever worked for owned and operated independent, familyrun inns and other related hospitality businesses. They had learned to be frugal, having lived through very hard times in World War II and the subsequent years as the economy grew and recovered in the decade that followed. When recently looking at a client’s income statement and examining it for potential cost savings, I noted a number of things they practiced that have merit today, but many hoteliers often overlook these simple measures. These simple, but cost-saving steps can be especially valuable in small properties and are offered as ideas for consideration.

Office

1. Eliminate unnecessary printing. Often we print a document that has unwanted advertising or a single line on the last page (think about what happens when you print up directions from MapQuest for a guest). This can be addressed by using software that can predetermine this waste of paper and ink. Always click on “print preview” before clicking the “print” button to ascertain how many pages will print and if they are all necessary. True savings start by becoming more cognizant of the actual cost and impact that extra paper and toner has on your bottom line. Make it a habit to start looking a bit closer at your print jobs.

2. Buy environmentally friendly paper. Yes, we still need paper, so look for environmentally friendly but cost effective options. Printer and copier paper made from recycled paper from 100% post-consumer fiber is the best option. This is paper that has been manufactured from recycled paper and wood products. No new trees have been consumed in this process and hence the paper is often less expensive. Another key advantage of using recycled paper is that it can be made easily with less toxic processes, and thus results in less pollution. Many times lesser known brands of paper may afford the best low-cost option.

3. Copier and printer settings. Verify that copiers and printers automatically default back to single copies after someone has printed multiple or duplex jobs. Whenever possible consider printing double-sided to minimize paper usage. Never print in color unless color ink is needed. Page for page, color ink and toner cartridges will run out four times faster than black cartridges because there are four colors in a color cartridge. They are also more expensive than black ink cartridges.

4. Buy re-manufactured ink and toner cartridges. Not only do these refilled and/or re-manufactured cartridges cost 15-25% less than new ones, but each reused cartridge saves a couple of pounds of metal and plastic being deposited into a landfill. It also takes almost half a gallon of oil to manufacture each toner cartridge. Most office supply stores gladly accept used toner and ink cartridges for recycling. Additionally, many manufacturers of these items have recycling programs in place or offer postage paid shipping labels to ship your used cartridge back in the box the new cartridge arrived in. Remember, recycling keeps the costs of these items lower for everyone, while minimizing unnecessary deposits in crowded landfills.

5. Re-examine office equipment at replacement time. All office equipment produces toxic substances in the manufacturing as well as the disposal stages; so the fewer office machines used by your office means the smaller your carbon footprint can be. There are many ranges of multi-tasking machines available now that copy, scan, fax and print. Acquiring a multi-task machine instead of four different machines that can perform separate tasks can decrease your acquisition and maintenance costs.

6. Power down. A substantial amount of office electrical power is used by machines that are off, but still plugged into a live outlet. Think about your iPhone or Droid – note the reminder to unplug the charger? Standby or phantom power is a huge and generally an unnecessary expense. At the end of the day, turn off all computers and other office equipment that will not be utilized until tomorrow. And don’t forget to unplug your cell phone or laptop power cords from the outlet after your battery is fully charged.

7. Do away with screen savers. The photos and graphics may be lovely to look at, but in addition to being at times distracting, they can consume a lot of energy. Set monitors to hibernate after shorter periods of inactivity. Likewise, set monitors to power off after a lengthy period of non-use. Save money and distractions, but do not forget to enable the “auto save” feature on your computer’s hard drive so you do not lose any work in progress.

General

8. Use more natural light. Artificial lighting represents 40% of electricity consumption in typical offices, so opening blinds and enjoying daylight wherever possible makes sense. Hotels in Asia and Africa (where electricity is very expensive) are often built with large windows in the lobby and guestrooms to take advantage of the free daylight. New WalMart stores are being built with hundreds of skylights designed to replace many electrical fixtures during the daytime.

9. Install motion sensors. Many hotels have realized cost-savings by installing motion sensors in remote housekeeping and engineering closets and even on vending machines. Now many are beginning to place them in guestrooms and public restrooms. Evaluate your office and meeting space and notice how many rooms have lights on, even when empty. Instead of leaving it to people to turn off lights as they leave rooms (which they often do not do), install motion-activated light switches. These will turn lights on for a designated period of time (e.g., 15 minutes) whenever somebody passes in front of the switch or moves around in the space.

10. Switch to compact fluorescent bulbs. I could not believe the quick pay back, but compact fluorescent bulbs use about 75% less energy than incandescent bulbs, and they last about 10 times longer. Their costs have dropped dramatically as society has started to embrace this new lighting technology. With compact fluorescent bulbs you can save on energy consumption, replacement bulb costs, labor costs associated with more frequent replacement, and reduce overall waste as well. These bulbs are now available in almost all sizes and wattages, with softer sheens than earlier models. No changes in equipment are necessary, as just about any light that uses an incandescent bulb can instantly use a compact fluorescent bulb.

11. Look at reasonable bulk purchases. Costco, Sam’s Club, BJ’s and other warehouse-style stores have made it possible to obtain reasonable amounts of cleaning and office supplies, as well as office type foods (coffee, sugar, etc.). Check your area warehouse stores to see how much you can save on these types of items.

12. Consider “green” cleaning practices and products. Paper towels can be replaced by hand dryers in restrooms and affordable environmentally-friendly cleaning products. These protect the health of not only your cleaning staff but also your associates, while also reducing harmful substances and odors from the office.

13. Remember the Lessons of Craig’s List. Those independent hoteliers I mentioned in the opening did not have the ease of Craig’s List, eBay or other online search options for sourcing unique items; but they often went to auctions and sales. They found many one-of-a-kind items at rock bottom prices they were able to use in many different ways. Use the Internet to search for unique items that you cannot find through traditional retailers, but don’t forget to stop every now and then at auctions and sales to see if you can snag yourself a bargain.

Are U.S. consumers apathetic about apps? When it comes to smartphones, could bigger be better? How do consumers feel about the BYOD (Bring Your Own Device) trend? When choosing a mobile device, how great a consideration is price?

The results aren’t what you might think – and keeping abreast of ever-changing consumer preferences is key to success in the fast-paced mobile ecosystem.

The 2013 edition of Deloitte’s Global Mobile Consumer Survey offers valuable insight into U.S. consumer behavior, purchasing habits and preferences. The survey, fielded by an independent research firm in July of 2013, takes the pulse of consumer sentiment across a broad range of mobile services, technologies and devices. In addition to providing U.S. information, the survey can help organizations better understand global consumer trends: the survey was fielded in 20 countries and encompasses the responses of nearly 38,000 consumers around the world.

Trends highlighted in the U.S. survey include:

Consumers are addicted to speed The tablet effect
Wi-Fi is growing … fast BYOD: win/win
Price matters … for some Is bigger better?
App saturation? Subsidy surprise?
4G drives it all The future of NFC?

 

Download the executive summaries:

The big picture in mobile
Overview of broad-based survey findings that impact the core network and services used by mobile consumers.

The deep dive in mobile
A focus on the specific devices and/or services in the mobile community, based on Global Mobile Consumer Survey data.

 

For additional information about the 2013 Global Mobile Consumer Survey, please contact us at This email address is being protected from spambots. You need JavaScript enabled to view it. . We also invite you to follow the conversation via social media channels via @DeloitteTMT and #GMCS2013.

Hunting for a top-rated hotel or searching for the perfect dim sum restaurant? Chances are you will turn to sites such as Yelp, Citysearch, or TripAdvisor to guide you through the mass of options most locations have to offer. As the Huffington Post recently noted, “In an increasingly tech-reliant world, most of us do not step foot in a restaurant or buy anything online without doing at least a modicum of Internet research.”

Hoteliers and restaurateurs have long known that positive online reviews equal greater occupancy rates, increased bookings, and greater revenue for their businesses: An influential 2011 Harvard Business School (HBS) study found that “a one-star rating increase on Yelp translated to an increase of 5% to 9% in revenue” for restaurants, while researchers at Cornell found that a one-star swing in a hotel’s online ratings on travel sites equate to a 11% sway in room rates.

So how trust-worthy are those 4-star online reviews? Turns out, unsurprisingly, caveat emptor.

A 2013 HBS report estimates that the number of fraudulent reviews on Yelp rose from 5% in 2006 to 20% in 2013.

While businesses may think that asking clients or friends to post positive reviews online is simply the cost of doing business in the internet age, the law says otherwise.  Regulators are catching on to businesses that artificially inflate their online reputations and are seizing the opportunity to bust companies that hire or solicit positive “fake” reviews.  Recently, the New York Attorney General’s office announced it had reached agreements with 19 companies to cease their misleading practices of posting fake reviews online. To the tune of $350,000 in penalties. This was after New York Attorney General, Eric T. Schneiderman, conducted a year-long investigation into consumer-review sites, finding that New York businesses had bribed clients to write fake reviews in exchange for gift certificates, hired overseas bloggers to post positive reviews, or took to the message boards themselves to defend their “false advertising” practices. Schneiderman calls this practice of disseminating a false or deceptive review that a reasonable consumer would believe to be a neutral, third-party review is a form of false advertising called “Astroturfing.” And Schneiderman suggests that prosecutors should step up and help put an end to the practice.

In addition, review sites are fighting back in an effort to protect their reputation. Yelp, for example,  has a page dedicated to explaining its policy of outing false reviews by using sophisticated software to weed out spammers.  Yelp has even sued a California law firm for posting bogus reviews.

The end game is that by producing fake online reviews, businesses may not only violate state laws prohibiting false advertising and illegal and deceptive business practices, but they may also incur significant penalties and their reputation may be irreparably harmed. (Schneiderman listed the names of all of the business online who were involved in the New York sting operation.)

If you are a hotel or restaurant owner, resist the urge to spruce up your online reputation by solicitation of—or by penning your own!—positive reviews, no matter how benign you think the practice may be. And if you are a consumer, remember: not everything you read on the internet is true.

 

If you have questions about how your online practices may violate state law, contact Greg Duff.

Because of the transient nature of guests who utilize lodging accommodations and the privacy afforded to these temporary guests, hotels have become prime venues for the exploitation of “at risk” individuals through sexual exploitation and human trafficking. Check any newswire or perform an Internet search and stories of human trafficking and sexual exploitation invariably connect to or through hotels in some form. Here are just a few examples:

From 2006 to 2011, members of an organized gang in San Diego ran a child sex trafficking ring of at least 16 girls out of various area hotels. At one hotel, staff members neglected to take any action to protect the long parade of children who were being ushered in to be raped. Furthermore, two members of the hotel staff permitted the gang members to use the hotel computer to post online ads advertising sex with the minors. Staff members also knowingly rented rooms for use in prostitution, charged higher room rates for rooms to be used for child sex trafficking and pocketed the difference, and warned the pimps if police were nearby.

Last month in Oakland, California, government officials sought to shut down two local limited-service hotels that have allegedly been hubs of prostitution and drug activity for several years. Officials said there have been numerous incidents of rape, kidnapping and violence - many involving victims as young as 14 who were forced to work as prostitutes.

In Orlando, a Florida man was arrested on charges of sex-trafficking last month at a full-service branded hotel. He was accused of selling sex with a 16-year-old girl and coercing a second young girl into prostitution who was “extremely scared” of disobeying him after he had physically abused her.

In December 2008, the ringleader of a sex-trafficking ring that spanned at least three states, was sentenced in federal court in Bridgeport, Connecticut, on federal civil rights charges for organizing and leading a sex-trafficking operation that exploited as many as 20 females, including minors. He admitted that he recruited minors to engage in prostitution; that he was the organizer of a sex-trafficking venture; and that he used force, fraud, and coercion to compel the victims to commit commercial sex acts from which he obtained the proceeds. According to the indictment, the defendant lured victims to his operation with promises of modeling contracts and a glamorous lifestyle and then forced them into a grueling schedule of dancing and performing at strip clubs and then forced the victims to walk the streets until 4 or 5 a.m. propositioning customers. The indictment also alleged that he beat many of the victims to force them to work for him and that he also used physical abuse as punishment for disobeying the stringent rules he imposed to isolate and control them.

What is sex trafficking?

Sex trafficking is a modern-day form of slavery in which a commercial sex act is induced by force, fraud, or coercion, or in which the person induced to perform such an act is under the age of 18 years. Enactment of the Trafficking Victims Protection Act of 2000 (TVPA) made sex trafficking a serious violation of United States law. Sexual traffickers use psychological as well as physical coercion and bondage to force their slaves to remain compliant.

Not only is human sex trafficking slavery but it is big business. It is the fastest-growing business of organized crime and the third-largest criminal enterprise in the world. The majority of sex trafficking is international, with victims taken from such places as South and Southeast Asia, the former Soviet Union, Central and South America, and other less developed areas and moved to more developed ones, including Asia, the Middle East, Western Europe, and North America. And it is this movement of victims from underdeveloped countries to more developed ones where hotels become initially exposed to sex trafficking.

Although anti-trafficking organizations can’t be sure how many people are forced into commercial sex work, the United Nations Global Initiative to Fight Human Trafficking estimates that human trafficking is a $32 billion business worldwide, with $15.5 billion coming from industrialized countries.

Victims of trafficking are forced into various forms of commercial sexual exploitation including prostitution, pornography, stripping, live-sex shows, mail-order brides, military prostitution and sex tourism. Victims trafficked into prostitution and pornography are usually involved in the most exploitive forms of commercial sex operations. Sex trafficking operations can be found not only in highly-visible systems such as street prostitution, but also in more underground venues such as closed brothels that operate out of residential homes. Sex trafficking also takes place in a variety of public and private locations such as massage parlors, spas, strip clubs and other fronts for prostitution, including some hotels and motels. Unfortunately, it is these handful of lodging establishments who either permit and support sexual trafficking or tacitly “look the other way” that has created a negative image of hotels as an inviting environment for human sex trafficking to occur.

Domestic trafficking

Unfortunately, sex trafficking also occurs domestically. The United States not only faces an influx of international victims but also has its own homegrown problem of interstate sex trafficking of minors. Although comprehensive research to document the number of children engaged in prostitution in the United States is lacking, an estimated 293,000 American youths currently are at risk of becoming victims of commercial sexual exploitation. The majority of these victims are runaways or “thrown-away” youths who live on the streets and become victims of prostitution. These children generally come from homes where they have been abused or from families who have abandoned them. Often, they become involved in prostitution to support themselves financially or to get the things they feel they need or want (e.g., drugs). Other young people are recruited into prostitution through forced abduction, pressure from parents, or through deceptive agreements between parents and traffickers. Once these children become involved in prostitution, they often are forced to travel far from their homes and, as a result, are isolated from their friends and family. Few children in this situation can develop new relationships with peers or adults other than the person victimizing them. The lifestyle of such youths revolves around violence, forced drug use, and constant threats. The average age at which girls first become victims of prostitution is 12 to 14. It is not only girls; boys and transgender youth enter into prostitution between the ages of 11 and 13 on average. 

International victims and what they face

Victims of sex trafficking can be women or men, girls or boys, but the majority are women and girls. There are a number of common patterns for luring victims into situations of sex trafficking, including:

  • •  A promise of a good job in another country
  • •  A false marriage proposal turned into a bondage situation
  • •  Being sold into the sex trade by parents, husbands, boyfriends
  • •  Being kidnapped by traffickers

Sex traffickers frequently subject their victims to debt-bondage, an illegal practice in which the traffickers tell their victims that they owe money (often relating to the victims’ living expenses and transport into the country) and that they must pledge their personal services to repay the debt. Traffickers often take their victims’ money and identity documents, including birth certificates, passports, and drivers’ licenses to prevent them from being able to flee, secure long-distance transportation, or provide for themselves. If a victim has no ability to support themselves or escape, they become dependent on the trafficker to survive.

Sex traffickers use a variety of methods to “condition” their victims including starvation, confinement, beatings, physical abuse, rape, gang rape, threats of violence to the victims and the victims’ families, forced drug use, and the threat of shaming their victims by revealing their activities to their family and their families’ friends.

Victims face numerous health risks. Physical risks include drug and alcohol addiction; physical injuries; traumatic brain injury resulting in memory loss, dizziness, headaches, numbness; sexually transmitted diseases; sterility, miscarriages, menstrual problems; other diseases; and forced or coerced abortions. Psychological harms include mind/body separation/disassociated ego states, shame, grief, fear, distrust, hatred of men, self-hatred, suicide, and suicidal thoughts. Victims are at risk for Posttraumatic Stress Disorder (PTSD) – acute anxiety, depression, insomnia, physical hyper alertness, self-loathing that is long-lasting and resistant to change (complex-PTSD). Victims may also suffer from traumatic bonding – a form of coercive control in which the perpetrator instills in the victim fear as well as gratitude for being allowed to live.

How hotels can respond

Hotels can take a number of steps to prevent and respond to sex trafficking. If you think you have come in contact with a victim of human trafficking, call the National Human Trafficking Resource Center at 1-888-373-7888. This hotline will help you determine if you have encountered victims of human trafficking, will identify local resources available in your community to help victims, and will help you coordinate with local social service organizations to help protect and serve victims so they can begin the process of restoring their lives. For more information on human trafficking visit: www.acf.hhs.gov/trafficking.

The Code of Conduct for the Protection of Children from Sexual Exploitation in Travel and Tourism, also known as ‘The Code’ is a set of voluntary guidelines developed by ECPAT (End Child Prostitution, Sex Trafficking, Tourism and Pornography), in cooperation with the travel and tourism industry. Hotels can adopt The Code as part of a strategy to help prevent what is arguably the worst form of sex trafficking – child sex trafficking. The Code has been signed by over 1000 travel and tourism companies including major hotel groups Accor, Carlson, Hilton, Wyndham and Millennium. These groups vary in the extent to which they implement it across their operations. Hotels can extend their implementation of The Code to other forms of sex trafficking.

Training of hotel staff is key. Hotel managers may never spot the signs of sex trafficking, but housekeeping and room service employees often know when something isn’t right. They are the employees that are in the guestrooms where much of the evidence of slavery or sex trafficking will be present. Train employees not just what to look for and to report indicators of exploitation to management in a timely manner, but educate all employees about the social and human costs of this horrendous exploitation. And remind them that the hotel’s reputation and perhaps its financial stability (and hence their individual job security), can be adversely impacted by the ongoing existence of such illegal activity.

Hotels can really be part of the solution to ending this systemic pattern of exploitation against at risk individuals. Remember, these are crimes being committed and these are people being mistreated. No respectable hotel should want to be associated with it.

Over the years, facility hotel and building managers have introduced many different and unusual methods for saving energy. Some were extremely expensive, while others were more or less just common sense. Some ideas that have been suggested in the marketplace could literally be characterized as outright fraud, where salespeople espouse that their magic black box will bring the building in harmony with nature, while saving energy. One of these products that seem to reappear periodically is the use of magnets to provide water treatment in swimming pools and air conditioning systems and other ridiculous applications. This product and concept has been around since the early 1970s when the energy crisis first began. This is not to say that some day the use of magnets won’t have a useful purpose; however, it is currently noted there is absolutely no scientific basis for this product application with swimming pools and HVAC systems.

Landscaping

On the brighter side, there are many useful, practical and cost effective ways of saving energy in a unique way. For example, now that Summer is here, many hotel owners have relandscaped the exterior of their property. Landscape shrubbery can improve the insulation value and comfort of a lodging facility. For example, 6 to 8 foot shrubs planted around outside air conditioners will help to block them from the sun and hence, improve the overall efficiency of the work units. Planting regular trees in the range of 12 to 14 feet high along the west and northwest side of a building (in the Northern Hemisphere) will enable the maintenance engineer to reduce the air conditioning load during sunset on hot Summer evenings. Vines can look beautiful growing on the side of a building; however, they can also cause problems to the curtain wall on at a property. The vines retain moisture against the building material on the outside wall, causing early deterioration. They can also block intake vents for heating/cooling systems and be the source of introduction of spores that may exacerbate hotel guest’s allergies when the air is distributed through the system. Remember that all the water used to irrigate the landscape does not result in a like amount sewer charge, because some of the water is lost to evaporation. The corresponding sewer charge is typically 50 percent of a property’s water bill; so this idea can save the chief engineer up to $2,000 a year in energy expense. In order to take advantage and realize these savings, it may be necessary to install an inexpensive water meter on the water line serving the irrigation system.

HVAC

Dirty air filters are one of the most commonly abused, inexpensive maintenance items in a hotel. If filters are not cleaned or replaced in a timely manner, a hotel would be better off to remove and throw them away, rather than let them get plugged shut with dirt. Once saturated with dirt and dust, unclean air filters begin to release the dirt they have trapped. As a result, large black spots can result around the air diffusers in the guestrooms, function rooms, and lobbies.Dirty air filters also significantly reduce the ability of a large fan to distribute fresh air throughout the building. Because air filters are so inexpensive, the prudent facility manager should consider changing them more frequently than recommended. As the old adage goes, an ounce of prevention…. Air filter material can also be used to improve the efficiency of the compressors that serve walk-in coolers and freezers in the kitchen. Each of these compressors has a fan that blows air across a small coil. Place a small piece of air filter material over this coil to prevent it from becoming blocked up with grease and dirt. This will improve the overall compressor efficiency by about 25 percent, and extend the life of the compressor significantly.

Timers

Common sense tells us there is no greater energy savings than 100 percent. This can only be accomplished by turning an energy consuming device completely off. The least expensive way of achieving this is with the use of an inexpensive 24-hour time clock. There are numerous and unusual ways of applying a time clock in a hotel’s energy setting. For example, many hotels have a small game room with up to ten game machines which typically operate 24 hours a day. This might be perceived as a waste of energy and can frequently result in guest complaints from the noises created by the game machines during late-night hours. Find the circuit breaker that runs the game machines and mount a timer beside it that will turn these machines off from 11pm until 6am. Just make sure that the hours of use are conspicuously posted in the game room. Surprisingly, each game machine can consume about 500 watts of energy. At a cost of $.07 per kilowatt hour, the decision to turn off ten of these machines for 50 percent of the time could save up to $1,500 a year. The cost of adding the time clock should be in the range of $200. Depending on your situation, you might see a return on investment in a matter of two or three months.

Through-the-wall units

Through-the-wall heating/cooling units have about a two-inch, round hole open directly to the outside for ventilation in guestrooms. Frequently, the knobs controlling these apertures will be found set in the “open” position. Additionally, there usually are openings around the entire perimeter of the through-the-wall unit, providing more than adequate outside air. When performing guestroom maintenance, engineering staff members should ensure these openings are closed. Consider removing the cover to the through-the-wall unit and disconnecting the knob so that no matter what position it is in, the outside air opening is “closed”. This will save both heating and cooling energy.

Natural gas

Combustion air is required in any areas of the hotel where natural gas is used. Typical areas include the property’s water heater room, pool heater room, kitchen, laundry, and boiler room. Without combustion air, carbon monoxide can build up and become a very serious health problem to guests and staff. It can even occasionally cause death. The combustion air system must be designed and installed correctly to eliminate oversized combustion air openings. It is not uncommon to find openings that are frequently three to four times larger than required by code in many of today’s hotels. Sometimes water heater rooms have supplemental heaters to make up for the introduction of extremely cold air through oversized openings during Winter. This results in a significant waste of energy. It is extremely important that a hotel retain a professional to verify that a facility’s combustion air system is designed and installed correctly and provides the proper amount of air. Combustion air systems may be checked using a rule-of-thumb formula. It is estimated that about one-half inch of free air opening is required for every 5,000 BTU’s of input to a property’s heating equipment. Simply note the BTU size on the label of the equipment and divide it by 5,000. The mathematical result will be about double the square inch opening required for that piece of equipment. Note the actual size of the hole through the wall to the outside and determine the square inch area. Applying the rule-of-thumb approach will help maintenance personnel identify whether they have a problem and should bring in a professional service technician to remedy it.

Pools and spas

One of the most popular amenities in limited-service hotels these days is a small indoor swimming pool and spa/ Jacuzzi. These pools and hot tubs are typically designed to be used in a small, enclosed, lockable separate room. The pool rooms are normally provided with a heating/ cooling and dehumidification system that operates continuously because of the problems with humidity buildup in these sealed spaces. The entire cause of this problem is obviously the standing water in the pool and hot tub. Water evaporates to the space, while also releasing energy to the space. An incredibly simple and inexpensive method of totally eliminating this problem during closed periods is with the use of an inexpensive pool cover. One person can easily install a cover on the pool and hot tub in less than a few minutes. The savings in energy, water and chemicals, much less the reduction in damage to the facility, are extremely attractive. The cost of a pool cover can be less than $300, and a hot tub cover is less than $100. Most covers are comprised of heavy duty sheet fabric that looks somewhat like packaging material with air bubbles in it. They can easily be folded up and stored in the pool equipment room during open periods. When the cover is on the pool and hot tub, it completely eliminates evaporation of water and chemicals and helps to maintain the water temperature. Obviously, the loss of chemical in the evaporation water is also eliminated. A good water treatment program for an indoor pool can cost $1,000 to $2,000 a year. Using a pool cover will cut this cost in half. The energy required to heat the pool and hot tub during nighttime periods can be set back, since heat loss will be reduced significantly. Moreover, the HVAC system serving the small pool area can usually be turned off for an entire closed period. Typically, these HVAC systems are provided with a low limit sensor that would turn the system on should it become too cold in the space. As with the other recommendations, this project requires minimal investment and will, on average, provide a payback within a matter of months.

Conclusion

These are just a few inexpensive and unusual ideas that can help reduce the cost of energy in hotels. As most are well aware, the cost of both gas and electricity has been increasing at a steady rate for years, and there is no change in sight. Hotel owners and operators need to take advantage of every practical opportunity to reduce energy consumption without affecting guest comfort.

Despite the myriad of resources available to hoteliers in a technologically advanced business environment, many front office managers opt to still engage in the age old business practice known as the daily "call around." This is where a PBX operator or front desk clerk engages in a benchmarking exercise by telephoning other nearby hotels to inquire about their selling rates and occupancy for the coming evening. Based on the information culled from the call around, some front office managers may choose to raise or lower their short term rates to maximize revenue potential.

When performing the call around, sometimes the caller pretends to be a potential guest inquiring about the prevailing rate and availability at the other hotel, though more than likely, the caller may choose to identify what hotel they represent and even offer to share their hotel’s selling rate and projected occupancy for the evening in exchange for the same information from the other hotel. Such a tactic often takes the mantra of, "If you tell me yours, I will tell you ours."

A faulty tactic

My professional experience over the years leads me to believe that this approach to keeping tabs on your competitive set (“compset”) is unreliable and rife with misleading intelligence. I cannot recall a time when my hotel ever supplied correct rate and occupancy information to another hotel directly. We always fudged the numbers one way or another depending on the projected demand for the evening.

If we were close to selling out and didn’t want to accept any overflow, we would always supply artificially high numbers so we could drive up average room rate perception among our competitors for the evening and justify quoting a higher rate to the few walk-ins that we would accept. If we had a glut of rooms that we needed to sell, we would quote artificially low rates and occupancy hoping to either pick up some overflow or walk-ins or to drive down the average rate being quoted to potential guests by our competitors. Either way, we never gave them the straight story.

In reality, I am pretty sure that they never gave us correct information either. Instead, it seems that all competing hotels were engaged in a huge waste of time and manpower to obtain unreliable data. We then based our short-term selling strategies off of this unreliable data, as did our competitors.

An illegal tactic?

What most hoteliers may not realize is that the practice of calling around to other hotels to obtain this data can be considered an illegal business practice and in violation of federal antitrust regulations designed to promote fair and open trade amongst competitors. The reason for promoting open competition is the belief that it motivates both producers to manufacture better products and sellers to sell these products or services at lower prices, thus benefiting consumers. Within the United States, both the Sherman Antitrust Act (1890) and the Clayton Act (1914) form the basis for such antitrust regulation. Penalties for violation of antitrust laws can be significant and may include court ordered dissolution or divestiture of a business, criminal penalties (jail and/or fines for owners or operators), and treble damages paid to injured plaintiffs.

What hoteliers should realize is that by calling around to inquire of rates and occupancy could be considered as collusion, a per se antitrust violation intended to restrain free competition. Per se violations are violations that are always illegal, regardless of intent. Similarly, anytime managers or owners gather together in a common environment (such as at hotel association events), they must also refrain from discussing or sharing prevailing rates, occupancies, ADR, RevPAR, GoPAR, Yield, or other operational statistics amongst themselves. Such actions could be construed as potential price-fixing agreements (or invitations to engage in such) intended to drive up room rates and potential profits at the expense of consumers.

Large fines for violations

In recent years, many governments throughout the world have been pursuing antitrust violations by hotels. In August 2011, the owner of three hotels and a management company in Connecticut agreed to pay, as part of a settlement, $50,000 in fines and to stop calling other hotels to learn their occupancy and room rates. The Connecticut Attorney General described the call around practice as “price fixing”. Just 16 months prior, the same Attorney General’s office settled with another hotel for similar violations. In November 2005, six luxury hotels in Paris were fined a total of 709,000 Euros for colluding on their business and marketing plans on a weekly and monthly basis in order to shift prices to higher levels. The managers spent considerable time on email and in meetings exchanging information in an attempt to fix prices.

Information that is not illegal

So, if sharing rate, occupancy, and other performance data directly with other hotels might be considered “collusion” or “price fixing” and hence illegal, where can hotel managers legally obtain critical information for benchmarking purposes? The answer is two places, the Internet and through industry research organizations and associations such as Smith Travel Research, Convention and Visitor Bureaus, Chambers of Commerce, your state’s lodging and tourism office or association, and even the American Hotel & Lodging Association.

The most reliable source of current rate information for future dates can be found online at each hotel’s website and through third party intermediaries such as online travel agencies. Want to know how much the hotel across the street is selling its guestrooms for tonight? Visit their website as any potential guest would to ascertain what the hotel is asking. Sometimes online travel agencies and other intermediaries may offer a lower price (especially for reservations booked through opaque travel websites), but they earn their profit through booking fees paid by the guests and commissions retained by the agency from the payments collected.

Computerized technology allows hotels and central reservation offices to raise or lower room rates on their website on extremely short notice based on actual demand demonstrated by bookings. Such dynamic pricing can be programmed into computerized models allowing the rates to fluctuate in sync with the demonstrated demand.

But many hoteliers forget that your competitors’ information is there online, all you have to do is look. Hotels will not post false rate information on their website because they would be required to honor bookings at the posted rate or lose out on potential revenue and profit if they set a rate artificially higher than the market would bear. The Internet is there for everyone to see, both potential guests and competitors alike.

The other logical source of competitor information for benchmarking would be derived from reports that are available either freely or on a subscription basis. Many hotels subscribe to Smith Travel Researches’ local compset and trends reports. While these reports can be expensive to receive, they render the most reliable “after the fact” market statistical data available. This is because hotels are required, as a condition of their subscription, to furnish their performance statistics in a timely and accurate, but confidential, manner. Smith Travel Research (STR) then takes this individual data and presents it back to its subscribers in aggregate form without revealing individual hotel performance data. STR Reports are great for benchmarking your hotel’s performance against your identified compset or within the general market, but will not allow you to benchmark against any single property.

Many CVBs, COCs, and other trade associations collect performance data directly from their membership, while others often partner with industry research companies such as Smith Travel Research, PKF Hospitality Research, Richard K. Miller & Associates, and Y Partnership to obtain and analyze performance data for their geographic locations. The advantage to these reports is that they are often free to members of the association, though it may take longer to reach individual hotels as they must be forwarded by the association after they are through completing their review or analysis.

Conclusion

Based on recent antitrust efforts relating to hotels, what is very clear is that hoteliers should no longer engage in “call arounds” to their competitors. Nor should they ever disclose performance statistics directly to a competitor, whether it is over the phone, via email, or even in a casual conversation or a business meeting. More reliable data that are not illegal to obtain or disclose is available through third parties sources. This is where hotel managers should invest their efforts. 

New York State Attorney General, Eric Schneiderman, has made waves in recent months by subpoenaing the popular “apartment-sharing” website AirBNB for information on more than 15,000 of the website’s hosts in New York City.  The subpoenas were issued as part of Schneiderman’s campaign to enforce a 2010 New York law that took effect last year, clamping down on “illegal hotels” across the state.  With the backing of tech trade groups and civil liberties organizations, AirBNB has now mounted a high-profile defense against these subpoenas.  Meanwhile, other destination cities around the globe are taking steps to follow New York’s lead.

Though press is not always a reliable barometer of public opinion, the most publicized reactions to the Schneiderman investigation have been negative.  AirBNB is popular with travelers and hosts, who have turned out in large numbers to petition against Schneiderman’s enforcement efforts.  At the time of this writing, the petition to legalize AirBNB rentals in New York City has gathered close to 240,000 signatures.  To put the significance of this number into perspective, consider that U.S. Congressional candidates need 1,000 signatures on a petition to be placed on the election ballot, and a petition submitted to the White House needs to collect 25,000 signatures before it receives an official response.

AirBNB’s following probably has less to do with the institutional loyalty of its customers and more to do with the rock-bottom rates of AirBNB rentals.  Because AirBNB hosts have low to no overhead, they are often able to underprice conventional hotels by wide margins.  In lower Manhattan, efficiency hotel suites start around $250-$300 per night.  By comparison, a vacationer can rent a full studio or 1-bedroom apartment in the same locations for $100-$200 per night.

So perhaps it comes as no surprise that AirBNB’s customers have bristled at this crackdown, even going so far as to accuse the New York law of suppressing “innovation.”  But it is hardly clear that it is AirBNB’s “innovation” – and not hosts’ avoidance (or ignorance) of the legal complexities of running a hotel business – that makes these savings possible.  Most AirBNB hosts operate in a legal limbo, complying neither with landlord-tenant laws (many hosts in New York City are tenants themselves), nor with the various layers of red tape applicable to hotels.   Yet in New York – as in most states – a lessor who is not subject to one of these regulatory schemes is, by definition, subject to the other.

New York’s law is somewhat unique, in that it prohibits units subject to New York’s Multiple Dwelling Law from being let for anything other than “permanent resident purposes” (30 or more consecutive days).  This law has been on the book for decades – its original purpose was to protect the rental housing supply in New York’s high-density living areas.  The 2010 amendments to the Multiple Dwelling Law simply eliminated loopholes in the text of the statute that permitted “illegal hotels” to skirt the law and lease out apartments in multiple dwelling buildings to shorter-term occupants.  The legal battle unfolding in New York is based solely on these recent amendments, and thus targets only AirBNB hosts who operate out of “multiple dwellings.”

Not all states have statutes analogous to New York’s Multiple Dwelling Law.   But most if not all states regulate hotels and residential landlords extensively.  And in most if not all states, a person who charges money for the privilege of occupying a room necessarily falls into at least one of these two categories.

For instance, California’s landlord-tenant law applies to “all persons who hire dwelling units located within this state,” with limited carve-outs for hotels, motels and time shares.  Under California law, an AirBNB host is deemed to be either a landlord or an innkeeper – there is no gray area in between.  Innkeepers and hoteliers in California are subject to special taxes, bailment obligations, and a labyrinth of other legal duties imposed by statute, regulation and case law.  Landlords in California are required to maintain the habitability of all residential premises, must make necessary repairs and provide a range of other services, have limited rights of entry upon rented premises, and generally cannot evict tenants without going to court.  Washington and Oregon make the similar distinctions between innkeepers and landlords, and impose equally complex legal obligations on both groups.

Whether AirBNB hosts are considered innkeepers or landlords under the laws of these states, they are operating in highly regulated spheres with high compliance costs that have, in the past, imposed barriers to market entry.  AirBNB hosts have avoided these costs, but they have done so largely by ignoring the law.  With this advantage, they are able to offer prices that law abiders can seldom match.

The critical question is: if these regulations exist for the benefit of consumers, why shouldn’t AirBNB hosts have to obey them?  Or, if these laws stifle innovation and harm consumers, why should they apply to anyone?  Shouldn’t hotels be free to compete with AirBNB hosts on the same terms?

This double standard has not gone unnoticed by those holding the short end of the stick in the hospitality industry.  Against the backdrop of the Schneiderman investigation, the Hotel Association of New York City has aired its own plans of bringing a private class action lawsuit against AirBNB on behalf of  its constituents.  The putative basis of this lawsuit – failure by AirBNB hosts to pay transient lodging taxes imposed under state law – would conceivably be applicable to AirBNB hosts outside of New York as well.

While there may be ample legal basis for such a lawsuit, this sort of litigation is not without its drawbacks.  AirBNB has many supporters, especially in younger demographics, and it has defenders in local news media (the New York Times, Huffington Post and NPR have all given AirBNB sympathetic coverage).   Websites have been spinning the Schneiderman investigation of AirBNB as a populist David vs. Goliath story — similar to the crackdown underway elsewhere against Uber, Lyft, Sidecar and other ride-share companies.  There is a risk that hotels could be singled out as the villains of this story if they are perceived to be acting out of self interest rather than fairness– and the direct involvement of industry groups in a private lawsuit would increase this risk.

The Recording Industry Association of America’s (RIAA’s) efforts to prosecute music piracy tell a cautionary tale.  In hindsight, the prevailing view is that the RIAA’s lawsuits against music downloaders backfired by fueling an “us versus them” mentality in which the RIAA became the enemy.  For a time, the RIAA had the distinction of being chosen as the “worst company in the world” by readers of the Consumerist blog.  And yet, for all the RIAA paid in money and reputation, it achieved very little —online music piracy happens more now than ever.    Perhaps this is why the RIAA, after years of pursuing copyright infringers in court, has now sheared away half its workforce and diverted funding from litigation to lobbying efforts.

Most of the present AirBNB reportage is focused on the Schneiderman crackdown, which might be a boon to hotels that wish to see the company subject to stricter rules.  To the extent that AirBNB’s competitors can level the playing field without entering the spotlight themselves, they stand to achieve a double-win.   If the time comes for industry groups to take a more active role in pushing for regulation, they may wish to consider softer alternatives to litigation.  Lobbying and public awareness efforts could send a more positive message that would not be perceived as undermining consumer choice.  The right messaging could go a long way to winning this fight.

What hotels are after – fair play – is in fact pro-competitive.  Competition is not supposed to be a “race to the bottom” in which the winner is the business that cuts the most corners or does the best job of disguising a dangerous product.  Let hotels do what AirBNB does, or make AirBNB do what hotels have to do.  Wouldn’t it provide consumers with the most choice and value if hotels were free to compete with AirBNB on AirBNB’s terms?

Politicians appear to be receptive to hotels’ views on this issue.  The crackdown taking place in New York is based on a law that was passed in 2010.  AirBNB only launched in 2008.  Paris and Berlin have already taken steps to pass similar legislation.  These are promising signs that suggest a solution that does not require litigation might lie within reach.

Feel free to email me or Greg Duff if you would like to know more about this issue, or how we can help.

Originally published on Duff on Hospitality.

The bar and nightclub industry looks so glamorous.  So much money to be made, so much fun and so much….(fill in the blank). Yet when you look beyond the smiles and bright lights, the hospitality industry is a business like any other.  The big difference is that bars and nightclubs sell alcohol, which makes them very sensitive to security and age requirements.

In the world of bar security and bar security issues within the hospitality industry, they include:

  • • Chain restaurants
  • • Nightclubs
  • • Sports bars
  • • Casinos
  • • Neighborhood bars with entertainment

There are a few questions to consider regarding today’s security and what is expected of them.  This is 2013 and things are different than they were even 10 years ago.  The cocktails are different, illegal drugs are a big problem for bar owners, the staff expectations are different, the laws are different and fake IDs are often of better quality than the real thing.

So – what do you expect from your security personnel?  Please don’t call them bouncers anymore.  The job grew up and the bouncer is no longer wanted.  Trained and certified security staff is the industry standard, not the football player paid in beer.

Is the role of security to escort patrons out of a bar only after an altercation has taken place? Are they responsible for identifying signs of intoxication? Should they be certified in one of the national certification programs for safe alcohol service? Should off-duty police officers be hired? Is a license required for security in your state? 

For a bar owner or licensee, serving or selling alcohol to a minor is a bad decision every time.   Fake IDs have come full-circle.  Internet IDs are excellent and can pass through a scanning machine.  Websites like Underground-review.com actually reviews fake ID websites and their products such as:

  • • U.S. drivers licenses
  • • Canadian drivers licenses
  • • European drivers licenses
  • • High school diplomas
  • • College diplomas
  • • College transcripts

That’s not even the scary part.  The scary part is the equipment used to counterfeit IDs, is often better than most state agencies use to create valid drivers’ licenses.  How are security staff taught to properly check IDs to keep alcohol out of the hands of minors?  What is reasonable?  What does a reasonable effort look like today when fake IDs are prevalent and may well be scanned through ID scanning machines costing several thousand dollars?

Does the purchase of the scanning machine constitute a reasonable effort?  When a minor gets through security, is served at the bar service, and consumes alcohol, it’s a major problem for the bar, the community and certainly for the minor.  An intoxicated minor who drives a vehicle and crashes said vehicle resulting in injuries costs millions of dollars.  When all is said and done, lawsuits over intoxicated minors cost tens of millions of dollars. 

Many bars hire off-duty police officers to stand at the door and check IDs.  That’s fine, but my personal opinion is (and I’ve taught hundreds of police officers in my classes), the choice of using off duty cops is 50:50.  Some take the job seriously.  Others seriously do not.  They want the extra cash they receive for the job and don’t really pay close attention to the IDs coming through the door, because checking IDs at a bar or nightclub is not their ‘real job.’

This article is not about teaching anyone the proper way to check IDs.  This article is about the seriousness of the security person’s position in a bar.  There are far more problems in the bar business today than ever.  Bar owners cannot hire a brother-in-law to watch the door as a favor.  The emotional toll it takes on bar owners is nightmarish.  Horrible, horrible stuff.  I guarantee you that the minor will point the finger at the bar 100% of the time if he gets hurt and will say one of two things:

  1. The bar never checked my ID.
  2. The bar didn’t check my ID properly.

This article is about the job of security and the seriousness with which bar owners must view them.  Training not only in non-violent combat, but training in a certified program that teaches both safe alcohol service and security issues.  Look for a program that includes both of those features.  If you can’t find one, then have security attend both of them.  It’s 2013, and it’s not going to get any easier.  But it sure is a glamorous business, isn’t it?  Right.

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