Questions & answers

How can Chinese investors navigate concerns about union membership and collective bargaining when investing in hotels?

We want to buy a hotel but found out the investment will be subject to union and collective bargaining. What type of U.S. professional can walk us through the implications of this and minimize accompanying risk?


Answers
  • December 18, 2017

    In general, investing in a "unionized" hotel may subject you to considerable costs and "headaches" in the future. One of the reasons is that some unions may have very "unreasonable" restrictions on the kind of work a hotel employee can be asked to perform. For example, an employee who folds blankets in the guestrooms on the 3rd floor may NOT -- due to the union restrictions -- be allowed to perform the same work on the 4th floor. Such restrictions can result in considerable inefficiency among the employees and, hence, an unexpectedly large cost to the hotel owner. If you have already decided to purchase a "unionized" hotel, you should be extremely careful in the purchase-and-sale negotiation with the seller, and you should make sure there is no hidden "withdrawal liabilities." Depending on how the deal is structured (e.g. whether you are buying the hotel as an "asset" or buying the hotel's "stocks"), there can be significant future liabilities. This could be further complicated by the fact that there is a union involved and, hence, a third-party interest to take care of. We strongly recommend that you seek help from hotel lawyers, because many real estate attorneys are not familiar with the hotel aspect of the transaction. We are hotel lawyers. Over the past 30 years, we have closed $71 Billion (with a "B") hotel transactions. Our law firm's name is JMBM. Moreover, we have Chinese-speaking staff. For example, I speak Mandarin and grew up in China. If you have any questions, please contact me directly via my profile.

  • Jeffrey Jahns

    Seyfarth Shaw LLP Real Estate Group
    December 13, 2017

    Hotel ownership is highly structured. Usually the owner will lease the hotel to an operator (e.g., Marriott, Hilton, Four Seasons, etc.). If ownership is properly structured, it is the operator and not the owner who may have union and collective bargaining issues. Our firm, Seyfarth Shaw LLP, has extensive experience and expertise in representing hotels on employment relations matters including union organizing.

  • Donald Wen

    WenWinSolutions
    December 18, 2017

    Labor unions and collective bargaining is a very complicated topic & concept to not just Chinese investors who are overseas; many US investors have shunned away from union hotels. Not only it's a legal tangle for hotel owners, if the contracts aren't negotiated properly, the financial impacts may affect the ROI as well. You'll need preferably a local legal team who's had a successful track record negotiating with the unions, and you'll also need to have extra patience for the negotiations process if you were to invest in these deals.

  • Seth Williams

    Aimbridge
    December 18, 2017

    Thank you for your question. Aimbridge Hospitality is the largest third-party operator of hotels in North America and we have deep experience dealing with unions in major cities. I am happy to arrange some time with the right members of our team to discuss. You can reach me directly via my profile.

  • Jon Ziefert

    Stroock & Stroock & Lavan LLP
    November 07, 2017

    You will need to engage experienced labor law counsel in the city and state where the hotel is located and get advice from that attorney. Labor law and union contracts are very localized so be sure to find a labor law attorney who regularly practices in that city and state.