16th Apr 2015
A hotel development project is a huge machine with many moving parts that fit together in intricate ways – a machine that runs on money. You need capital to clear the way in zoning and design, capital to hire contractors, capital to purchase materials, capital in reserve to handle emergencies. More than one hotel development project has run into financial straits for a variety of reasons:
- Unforeseen cost overruns on labor or materials
- Fines and work stoppages from local agencies
- Loss of investors due to delays or other confidence-busting problems
When financial issues threaten a hotel project, tensions rise and people often lose their ability to work together in a calm and professional manner, especially between owners and operators of the hotel property. In these scenarios it is often helpful to bring in a neutral, experienced real estate arbitrator to help resolve owner-operator disputes.
The Arbitration Process
Arbitration involves identifying a professional neutral with experience in the hotel development and operation fields who has no connection to the project at hand, and who is acceptable to both sides of the dispute. The arbitrator is imbued with the power to assess all the information and render a decision, which is typically binding. Unlike in mediation, the arbitrator’s decisions are usually final.
The benefit is a quick and decisive resolution to the dispute which gets everyone back to work and everything back on schedule. This is why selection of the arbitrator is crucial: Any doubts harbored by one side or the other can derail the process the moment they see things going against them in any way. By selecting a neutral that both sides respect, all of these potential problems can be avoided, and the project can proceed. When the neutral has extensive hotel industry experience as well, it sets up a clear path toward resolution of the conflict.