The Dynamics of International Law in the Hospitality Sector with Nelson Migdal, Principal Shareholder at Greenberg Traurig
Nelson Migdal, Principal Shareholder at Greenberg Traurig, joined iGlobal Forum last week as the chairman and as a moderator for the opening panel session on the market outlook for the hospitality and lodging sector. He brought his extensive experience working in this industry for the last 30 years to share with the attendees at the 3rd Global Hospitality and Lodging Investment Summit, and has been directly involved in the sale, purchasing, and financing of hospitality assets, as well as the relationship between owners and managers through management, franchising, and licensing.
Q: Through your extensive experience in negotiation management agreements, how has the field changed?
A: The Owner/Manager relationship is always developing and changing. Each side has had the upper hand from time to time. Right now, the most significant development concerns the owner’s power to terminate management contracts because of the way some courts have recently interpreted the agency relationship. It is an area of hotel law that will continue to develop in the coming years.
Q: In your recent projects, you have been dealing with hotel management agreements across the globe – how does the international aspect of these deals affect your approach and success for each of these projects?
A: When approaching the Owner/Manager relationship outside the United States, it is wise to appreciate that the entire construct of that relationship may not be as familiar to the hotel owner. The management agreement is certainly moving around the world, but in many places it is relatively new. The wise practitioner will be mindful of this and make sure to lay a proper foundation for the negotiation before just jumping in.
Q: Have rising interest rates affected new acquisitions and construction projects in your recent deals? How have they affected the different areas in which you are working differently?
A: The availability of relatively inexpensive debt financing is permitting many transactions to proceed, and this has been a positive development for the industry. As rates creep up the financial engineering element of hotel deals will need to join forces with the hospitality elements of hotel deals to insure that the hotel guest is being well served.
Q: How have supply changes affected the hotel and lodging industry? Is this growth globally sustainable?
A: This is one of those “it depends” questions. Some markets are becoming saturated and raising questions about the ability to absorb additional rooms, while at the same time there are other markets that could still use additional and new supply. Opportunities in secondary and tertiary markets are being examined for just this reason and there will be opportunities for growth in some places but not others.
Q: What does the future of hotel recovery currently look like? How much longer will this stage last?
A: At the conference there were some words of caution that this recovery may be slowing. Certainly we heard some concerns about Manhattan and using baseball examples that we might be in the later innings of the game. If that means that driving hotel performance will be tougher because of higher debt service and costs, then I suppose we will all be working harder to actually get the business of being hoteliers right and consistently delivering excellent services and amenities to guests, which is not a bad change in the end.
Nelson F. Migdal is a Principal Shareholder at Greenberg Traurig and co-Chairs the Hospitality Group. Nelson has been practicing law in the hospitality area foralmost 30 years, and has extensive experience in negotiating management agreements. Recently, Nelson has been involved in several significant hotel projects. Nelson handles hotel and gaming management agreements for Hard Rock Holdings, such as the Eurovegas project in Hungary, the Moon Palace project in the Dominican Republic, the Northfield Park “Rockcino” and Meadowlands Racino. Nelson is also counsel to ownership in connection with large mixed-use hospitality based projects in Panama as well as hotel projects throughout Central America and Latin America. Nelson is an officer of the Academy of Hospitality Industry Attorneys, a member of the International Society of Hospitality Consultants, and a member of the adjunct faculty of the American University College of Law.
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For more information on iGlobal Forum’s 3rdGlobal Hospitality and Lodging Summit –http://www.iglobalforum.com/hospitality3.html
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Interview by Jennifer Wiegele of iGlobal Forum