8th Apr 2014
While it’s clear that mediation would be a useful addition in a permanent and dedicated position within most luxury hotel and resorts, mediation isn’t only effective in staff and labor disputes such as housekeeper rebellions or maintenance worker resentments – it’s also useful for larger hotel-related issues between owners, operators and franchisors.
Franchisee and Franchisor
In most hotels there is a division between the franchisor (the brand) and the franchisee (the actual owner of the hotel) – or between the owner and the operator (the management company). In these circumstances, both parties have a lot to lose if the dispute goes public and details are exposed, especially if the disputes have to do with service, safety or quality issues. Mediation quickly becomes an incredibly valuable tool for both sides of the dispute, as it serves to not only resolve the issue more efficiently and affordably than with litigation–it does so with the privacy protections that mediation offers, as opposed to the completely public forum of the courts.
A good example occurred between one of my clients—who owns multiple units within the same franchise—and their franchisor. The brand threatened to disenfranchise the owner, which operated several hotels under the same brand. Mediation was attempted, but was unsuccessful – but as any Alternative Dispute Resolution (ADR) expert will tell you, there’s more than one step in the ADR process. The second step was arbitration.
The franchisor “pulled the flag” from the owner’s hotels, which was publicly embarrassing for the owner, and confusing for its guests – and did no favors for the brand, either. The franchisor would have been better served if they’d put more effort into resolving the dispute through mediation; the owner re-flagged quickly enough, and the hotels are now outperforming their previous levels, proving that the franchisor had better options than disenfranchising the owner in a huff that probably felt good, but didn’t accomplish what they wanted.
In another example, a major brand got embroiled in a dispute with its owners over fees and income from a portfolio of hotels. Instead of dragging it into court, the brand sat down with its owners and worked out a mediated settlement. The settlement amount was not cheap, but this solution preserved its brand and public image by using mediation.
Whether its internal, behind-the-scenes conflicts or big-money disputes between franchisee and franchisor, mediation and arbitration are ideally suited to the image-conscious hospitality industry. I believe ADR should be used more often, and the brands should have an established, dedicated presence for disputes that arise both within the hotel and at the ownership level.