Hospitality: 2023 Year in Review

As we enter the final quarter of 2023, the ArentFox Schiff Hospitality Industry group has identified several opportunities and challenges that could impact the hospitality industry, including issues related to artificial intelligence, debt and equity markets, false advertising class actions, and recent decisions in employment and labor law.

1. The Wide-Ranging Impact of AI

ArentFox Schiff is at the forefront of legal analysis of issues arising from the increasing integration of AI into business operations, including those of the hospitality industry. This includes monitoring how the hospitality industry continues to integrate generative AI, as previously discussed here and as will be discussed in an upcoming presentation in Austin, Texas. We also analyze how emerging regulations may impact the use of AI by hospitality companies, as discussed in a recently-published article in Hotel ManagementAdditionally, we discuss aspects of proposed Congressional legislation intended to provide oversight and consumer protections related to the development and use of AI. Lastly, we provide insight on a recent, first of its kind Equal Employment Opportunity Commission (EEOC) lawsuit and settlement arising from allegations of an employer’s use of AI to exclude or disparately impact protected groups in its hiring process.

2. State of the Hospitality Market

Persistent turmoil in the debt and equity markets continues to impact the hospitality industry. ArentFox Schiff has been monitoring how the debt and equity markets are reacting to this turmoil and how those market strains impact hospitality transactions, with its most recent analysis discussed here.

3. Hotel Fee Legislation and Proceedings

A traveler advocacy organization recently filed class-action lawsuits against Hyatt Hotels and Sonesta Hotels related to allegations of false advertising with respect to room rates and deceptive practices related to other hidden fees. These suits are just the latest in a long string of government enforcement and private plaintiff actions focused on rates advertised by hotel companies, summarized here.

ArentFox Schiff has also been monitoring pending California legislation, which is likely to have an impact on how hotel operators and other businesses present fees and charges to guests. An update on these amendments can be found here.

4. Borrower Concerns Related to Non-Recourse Carve-Out Guaranties

With continuing uncertainty in the debt and equity markets, ArentFox Schiff discusses pitfalls and concerns that borrowers and guarantors should bear in mind in a recently published article in Hotel Business Review that can be viewed here.

5. Potential FTC Ban on Noncompete Covenants in Franchise Agreements

The Federal Trade Commission (FTC) requested public comments as to whether the FTC’s proposed ban on post-termination noncompete covenants in employment agreements should be expanded to ban post-termination noncompete covenants in agreements between franchisors and franchisees. ArentFox Schiff continues to monitor this situation, which is discussed here.

6. Recent NLRB Decisions Impacting Hotels

In a few recent decisions, the National Labor Relations Board (NLRB) seems to have overruled precedent in a manner limiting the discretion of employers. In its Cemex Construction Materials Pacific LLC decision, the NLRB overruled a 50-year-old precedent regarding an employer’s options when confronted with a union’s demand for voluntary recognition in a manner that is more favorable to the union. The consequences of this decision can be viewed here.

The NLRB’s dual decisions in Wendt Corporation and WendtTecnocap, LLC overruled recent precedent relative to discretionary changes to terms and conditions. These new decisions limit an employer’s latitude to making discretionary changes to employment terms and conditions while a collective bargaining agreement is being negotiated or has lapsed. A summary of those NLRB decisions can be viewed here.


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