SYDNEY—Leave it to lawyers to recognize the pain they are inflicting and ease it through humor. Co-host John Stawyskyj did just that during the opening day of the HotelsWorld series of events in Australia’s most populous city.
“Due diligence is the root canal therapy of the legal process,” said Stawyskyj, practice leader of hotels, tourism & gaming for Ashurst-Australia, where the opening day of programming occurred. “If not done properly, it will lead to a very serious toothache.”
The humor set the stage for the Hotels Legal World program as the importance of due diligence was a common thread through most of the panel discussions.
John van der Wallen, asset manager for Starhill Hotels, said during the “How much due diligence is enough?” panel that most people get the first stage wrong because they don’t get a third party involved early enough to look into issues such as supply, demand and infrastructure.
“That first step, I find it lacking,” he said.
Dannelle Howley, counsel for law firm Allen & Overy, concurred during the “Transaction roadblocks and how to deal with them” session. She said a common issue is when the seller of a hotel waits for the purchaser to provide its due diligence before beginning its own process.
“This needs to be done at the inception of a deal,” Howley said.
Carl Black, partner with law firm Squire Patton Boggs, said the due diligence for new builds goes beyond the scope of only the project in question.
“Understand the same sort of frameworks that apply to your neighbors and the assets located in the vicinity of what you want to do,” he said during the “New build issues” session.
Management contracts and franchising agreements were also in the spotlight during the entire program. The concepts are gaining popularity throughout the Asia Pacific region to the point where they’re no longer considered unique, speakers said.
“They are pretty much international documents,” said Tony Ryan, managing director of global mergers & acquisitions for JLL Hotels & Hospitality Group, during the “Global legal perspective” session. “The good thing about being a lawyer in this business is you can take those documents around the world and those concepts around the world with you.”
The biggest difference between the two concepts is that franchise agreements are much more regulated than management agreements in nearly all jurisdictions, speakers said.
“We see the trend throughout Asia as well … a lot of markets are pushing toward this highly regulated franchising model,” said Joanne Simpson, senior manager, legal counsel for Wyndham Vacation Resorts Asia Pacific, during the “Management options 2016” session.
“One of the biggest advantages of the management agreement is there are no regulations,” added Benjamin McLeod, VP & assistant regional counsel APAC for Marriott International, during the same panel. “Getting to market can be a lot quicker.”
The other common thread from the day aimed at legal minds include many references to fundamental industry trends such as mixed use, titles and even liquor licenses.
Stats/Slide of the Day
There’s plenty of room for the franchising model to grow in Australia, according to speakers during Tuesday’s HotelsWorld sessions. Among the data presented was JLL’s breakdown of operating models of accommodations throughout the country. (Source: JLL)
Quote of the Day
“How keen international investors are to be part of something in our part of the world? There’s a large interest from large institutional investors who want to get a foothold here.” —Carl Black of Squire Patton Boggs
Picture of the Day
From left: Richard Crawford and Michelle Lalli of Mantra Group and Tim Crooks of Resort Brokers Australia, share a light moment talking about Taylor Swift’s recent stay on Australia’s Gold Coast. The singer reportedly eschewed a traditional hotel to stay at a Broadbeach penthouse at the Oracle condo-hotel development in Queensland, Australia. (Photo: Jeff Higley)