Global hospitality and travel industry adjusts to legal realities of Covid-19
Contracting issues and employment law concerns top of in-house agenda, according to a Luxury Law Alliance and Barnes & Thornburg roundtable
The coronavirus pandemic has taken a toll on many industries, but few have felt its effects more sharply than the hospitality, travel and leisure industry.
In the first months of the outbreak, global lockdowns kept people indoors or their movement severely restricted: planes were mostly grounded, hotel rooms stood empty.
Yet as the pandemic has progressed and economies have reopened, the global hospitality industry has adapted—leisure holidays have bounced back, while business travel is also showing signs of recovery.
A high-level group of GCs from the sector gathered last month for the first of a series of Luxury Law Alliance roundtables to take stock of the unique situation they have faced and plot the path to full recovery.
The speakers included: Kempinski Hotels general counsel Hadrian Beltrametti-Walker and his colleague Rebecca Tamegnon, who is legal counsel and global data protection manager; Michael Ellis, general counsel of Abercrombie & Kent; and Ken Yerkes, partner and chair of the labour and employment department at Barnes & Thornburg, which sponsored the roundtable.
The attendees heard how in-house counsel have been kept busy as companies seek to revamp their policies and amend their terms and conditions to adjust to the new normal.
“We’ve really had to look at our terms and conditions quite carefully,” said Ellis. “Our suppliers are being a lot more flexible with their terms, instead of paying six months or 90 days upfront, we’re putting consumers’ money into a trust account and not paying the suppliers until the day of travel.”
Force majeure clauses
Travel companies and hotel operators have also been paying more attention to the force majeure clauses in their commercial contracts and to what extent they could be triggered by the impacts of Covid-19.
“There can be a benefit of claiming force majeure because it can excuse you from performing contractual obligations, but this can also act as a double-edged sword if your force majeure clause then gives rise to a termination right,” said Beltrametti-Walker. “We’ve also seen a lot of issues with payments of fees or people trying to negotiate payment holidays.”
That has created a need for both flexibility and a heightened focus on relationship management to ensure business relationships don’t sour as pandemic pressures mount.
“When it comes to long-term high-value contracts, what we’ve found is there might be some compromises that need to be made, and a lot of it is how to foster that relationship and ensure that relationship still continues in the long term even though both the hotel owner and the hotel brand are going through difficult times,” said Beltrametti-Walker.
The mandate has become a tipping point in the employment relationship as it relates to Covid
Hospitality companies have also been forced to rethink their cancellation policies as consumer expectations shift amid the uncertain travel backdrop.
“There is an enormous amount of pressure where people are saying I want to book this, but I don’t want to give you any money for it and then cancelling a day before but you’ve already spent money putting things in place,” said Ellis.
“So you’ve got to have cancellation penalties of some sort, but what is happening is that they are narrowing and I think where we used to have other cancellation policies before, it’s going to take some time to settle down in the future.”
Employment issues have also increased for the hospitality and travel industry during the pandemic. First, companies had to deal with an exodus of employees who didn’t want to risk exposing themselves to the virus. Now as vaccines become available, hospitality companies are facing a new dilemma: enforcing vaccine mandates and dealing with employees who refuse to get vaccinated.
“The mandate has become a tipping point in the employment relationship as it relates to Covid,” said Yerkes. “Prior to the mandate, employers, employees and unions were working in a more collaborative way to come up with solutions to help people work safely and keep their jobs. That changed with the mandate because the word mandate felt like a command, eliminating choice.”
He added: “In the US there are limitations in your ability to force a consequence, even though there is an executive order that mandates vaccine for employers with more than 100 employees. As a practical matter there isn’t an ability to force a termination if an employee chooses not to get vaccinated: employers have a critical need right now for qualified employees. You cannot terminate a workforce to enforce a mandate. Unionised employers have the additional burden of having to bargain the effects of the mandate on its unionised workforce with little or no leverage to use in negotiations given the governing law. So the word mandate and the concepts around it have built a wall between employers and employees in an unfortunate way, and there is no easy way out of that dialogue at this point.”
Another issue that travel and hospitality businesses are facing is tougher data privacy laws, something that can be a challenge for companies that provide personalised services but operate across borders where data sharing is becoming more complex. Data privacy rules are now operational in dozens of countries globally, with China becoming the latest to implement its Personal Information Protection Law, or PIPL, at the start of November.
“GDPR has inspired a new era of data privacy and all these new regulations, while not carbon copies of GDPR, most of them are definitely based on the GDPR principles and most of them have extraterritorial reach, which means that to a certain extent and under certain conditions they affect all organisations around the world irrespective of their location, and this is obviously a big challenge for us because how can we achieve compliance with all these regulations,” said Tamegnon.
Some companies are managing the influx of data privacy laws by applying GDPR to their global operations given that the EU’s rules tend to demand a higher standard than elsewhere.
“What we’ve done is rolled out GDPR across all our 50 offices around the world, and then when a new law comes in we compare them to GDPR, and what we find is that pretty much 99% of what we’re doing because we’ve introduced GDPR means we’re already compliant in that country with their legislation,” Ellis said.
Sustainability issues are also becoming more prevalent, with customers often expecting and demanding that the resorts or hotels they stay at have some kind of ESG policy. The development of sustainable aviation fuel is also helping the travel industry to reduce its carbon footprint.
“Private aviation groups have set a goal for the sector to be carbon neutral by 2050,” said June Sebley, head of customer relations at Signature Flight Support. “Sustainable aviation fuel (SAF) is the fastest, most trusted, and most readily available way to reduce private aircraft emissions, and Signature Flight Support has been the industry’s biggest adopter of SAF with over four million gallons delivered into customer aircraft since September 2020.”