Hospitality & Hotel Litigation & Emerging Issues
Hotels sit at the intersection of real estate and operating business — which means their disputes run through franchise agreements and labor exposure as often as through the loan itself.
What's driving disputes right now
Grounded in current market and legal reporting, not speculation — each item links to its source.
Franchise Agreement & PIP Disputes
Brand-mandated Property Improvement Plans (PIPs) continue to generate disputes between franchisors and owners over cost, timeline, and compliance standards — especially on aging assets facing a large capital bill all at once. In one 2024 bankruptcy case, a court let a Hampton Inn franchisee assume its Hilton agreement over Hilton's objection despite missed PIP deadlines, holding the misses weren't material or economically harmful enough to defeat assumption.
Why it matters: A missed PIP deadline isn't automatically fatal to an owner's rights — courts look at materiality and economic harm to the brand, not just technical compliance.
Brand Termination & Liquidated-Damages Claims
A federal court let a franchisor's roughly $5.25 million liquidated-damages claim proceed after terminating a hotel license agreement over a missed construction-completion deadline, rejecting the franchisee's argument that the comparable-hotel-revenue formula used to calculate damages was an unenforceable penalty.
Why it matters: Franchise liquidated-damages clauses tied to pre-opening termination can survive a penalty challenge even at a multimillion-dollar scale, so owners should scrutinize the formula before signing, not after termination.
Distressed Hotel Loan Workouts
The same 2026 CMBS maturity-wall dynamics hitting office and multifamily are reaching hotel loans too — complicated further because a hotel workout has to value an operating business, not just the real estate underneath it.
Labor & Staffing Litigation Spillover
Franchise-level labor disputes — wage-and-hour claims, joint-employer theories — are increasingly naming the property owner alongside the operator, blurring the line between real estate and labor liability.
Franchisees Pushing Back on Vendor Programs
An arbitrator found Choice Hotels breached its franchise agreements by failing to pass through promised volume discounts and pricing on brand-mandated vendor programs — a federal court later confirmed the award, including roughly $760,000 in attorneys' fees against the franchisor.
Why it matters: The franchisor-vendor-program relationship runs both ways — owners are increasingly willing to arbitrate when a brand's own procurement commitments go unmet, not just defend against termination claims.
Facing an issue like this?
If your portfolio has exposure here, it's worth a conversation before it becomes a bigger problem.
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