Global Accommodation Space - Legal Trends
Legal trends tend to move a bit slower and less uniformly. Regulations that hold corporate entities accountable for human trafficking incidents are a hot topic nowadays, and are creating a surge in lawsuits filed by victims against hotel chains in the United States, while Asian countries are adopting new guidelines to mitigate the spike in sex exploitation that resulted from the growth of the travel industry. Meanwhile, regulatory bodies are focusing on cybersecurity and privacy concerns and making it clear to hotels that they are accountable for data breaches. Furthermore, home-sharing companies are under scrutiny, as hotel lobbyists pressure regulators to impose the same regulations on peer-to-peer platforms that the hotel industry has to face, and cities speculate if short-term rentals are hurting the housing market for full-time residents. Each trend and examples of the impact worldwide are presented below.
Trend #1: Human Trafficking and Corporate Liability
- The hospitality industry is a big part of the human trafficking problem worldwide. Traffickers using hotels as prostitution venues and forcing people to work in the hotel's supply chain is a well-known dark side of the industry. However, it recently came back to the spotlight, with victims and organizations calling for corporate responsibility, while governments are amending laws and adopting new guidelines.
- It is estimated that 80% of all human trafficking arrests worldwide happen "in or around hotels." Some chains are taking action to mitigate the issue. For instance, Marriott is making company-wide efforts since 2017. However, some critics point out that these actions are not effective.
- In the past, human trafficking prevention was viewed as a corporate responsibility activity. It is now becoming an operational concern similar to "fire insurance training staff on food prep," claims Damien Brosnan, a program manager at The Code, an organization focused on fighting human trafficking, which counts with members such as AccorHotels, Hilton Worldwide, Hyatt Hotels Corporation, among many others.
The United States Opened the Door for Lawsuits Against Corporations
- A recent study determined that 81.5% of all sex trafficking cases in 2018, in which a location was identified, happened at a hotel. In 2019, the Trafficking Victims Protection Act was amended and reactivated. It includes a provision that allows plaintiffs to bring legal action against “anyone who knowingly benefits—financially or otherwise—as a result of the trafficking,” which opens the door for lawsuits against corporate entities, including hotel chains.
- There are also signs that corporate liability may be the new trend in other areas as well. While not specific to the hospitality industry, in 2018, the government expanded the "Allow States and Victims to Fight Online Sex Trafficking Act" to allow online websites to be held liable for user-generated content, such as sex trafficking.
- The media attention is increasing awareness and civil claims. One lawsuit is seeking $100 million in damages against 22 hotels in Florida. Meanwhile, a lawsuit filed in New York is suing Choice Hotels Corporation, which operates Wyndham Hotels & Resorts.
- Skift, a publication specialized in the hospitality industry, states that these lawsuits “are a particularly hot issue of late.” As of March 2020, several lawsuits nationwide are accusing hotel chains, such as Marriott, Hilton, and Wyndham, of ignoring and profiting from sex trafficking. The suits are seeking damages and policies to prevent it from happening again. Some estimate that it may be just the beginning.
Asian countries are approving new guidelines
- In June 2019, parliamentarians from the Association of Southeast Asian Nations agreed to a “24-point “check-list,” which will guide future legal interventions to protect children in their home countries. This is a significant development for the region, which has seen an increase in child sexual exploitation in recent years — in tandem with the massive growth of the travel industry.”
European countries are behind but the media is paying attention
- In 2018, The Commission on Security and Cooperation in Europe, in a joint briefing with the US Congressional Caucus on Human Trafficking, stated that hospitality and travel companies have been "slow in joining the fight" against human trafficking.
- Hotels in the UK are teaching staff to identify signs of trafficking and scrutinizing suppliers. However, they do not pay attention to the background of their employees, and experts believe these hotels may be hiring slaves. There is an ongoing review of the 2015 Modern Slavery Act, which could address some of these issues.
- Others expect that Airbnb's IPO will shine light into its relation to human trafficking and escalate legal gray areas. Either way, the media attention and public debate are likely to have the same effect it had in the US, forcing authorities to pay close attention to hotels and how they are handling modern slavery.
Trend #2: Cybersecurity and Privacy Issues
- The hotel industry is focused on advancing technology and personalization for its clients. However, technology makes the industry vulnerable to attacks, and collecting data to provide personalized services creates compliance issues in a world where data privacy is a “hot-button issue worldwide.”
- Regulatory bodies are turning their attention to cybersecurity and privacy concerns after high-profile breaches, such as Marriot reporting that data from 500 million clients were exposed in a cyberattack. The EU's General Data Protection Regulation took effect in 2018, and it is expected that the US will enact a federal data privacy legislation soon, and the hospitality industry is likely to face compliance challenges.
- The industry is considered one of the top three most vulnerable industries to cyberattacks. As such, the allocation of "potential liability among hotel owners, operators and brands for disclosure of private information" is facing increased scrutiny.
California enacts the CCPA
- The California Consumer Privacy Act (the “CCPA”), enacted in 2020, applies for business entities that collect and process personal information from consumers and do business in California. Although there are standards businesses have to meet to become a subject of the CCPA, several hotels and chains will likely have to comply.
- Robert Cole, the founder of RockCheetah, a hotel marketing strategy and travel technology consulting firm, explains that data privacy is going to be a significant issue for hotels. He further adds that many hotels are not even able to accept direct deposits because they are not compliant with the Payment Card Industry Data Security Standards (PCI).
The UK fined Marriot International
- Marriot International was fined $123 million by The United Kingdom’s Information Commissioner’s Office (ICO), which enforces the General Data Protection Regulation in the UK in 2019, due to the data breach that occurred in 2018.
- Elizabeth Denham, Commissioner of the ICO, stated: “The GDPR makes it clear that organizations must be accountable for the personal data they hold. This can include carrying out proper due diligence when making a corporate acquisition, and putting in place proper accountability measures to assess not only what personal data has been acquired, but also how it is protected.”
- Jim Butler, a top hotel lawyer, explains that hotels need to “take this action seriously and consider its ramifications,” given the amount of personal information they collect from clients.
Trend #3: Home-sharing Companies are Under Legal Scrutiny
- Peer-to-peer players are facing increasing legal scrutiny and are starting to be subjected to the same rules and taxes imposed on traditional hotels. Some governments are requiring licenses or register before listing a short-term rental, which also typically includes the payment of transient occupancy taxes, while others are limiting the number of days people can rent their property per year.
- According to Todd Soloway, head of Pryor Cashman LLP's hotel and hospitality group and real estate litigation practice, hotels will be more active in “lobbying governments to regulate home-sharing platforms,” due to their success.
Cities in the United States are forcing platforms to remove listings
- Cities in the US are imposing monitoring obligations on home-sharing and peer-to-peer rental platforms. Airbnb was recently forced to comply with a Boston ordinance that was passed in 2019, which placed restrictions and fines on home-share companies if they did not monitor and removed listings that are not registered and, therefore, illegal. The company also agreed to share data with the city.
- The company also agreed to settle a lawsuit with Miami Beach over an ordinance requiring it (and other platforms) to “police illegal rentals or face fines from the city.” The company is now forced to require owners to provide their business tax receipts and resort tax numbers before listing on the site.
Europeans are debating the classification of peer-to-peer platforms
- The European Commission signed a data-sharing agreement with Airbnb, Booking, Expedia, and Tripadvisor, enabling Eurostat to publish data about short-term stay accommodations sold on the platforms.
- Barcelona fined Airbnb over permit issues and forced it to remove illegal properties from the platform, while Sadiq Khan, London’s mayor, is asking for a new registration system for short-term rentals to help “protect the capital’s housing for long-term residents.”
- In April 2019, ten European cities published an open letter asking the EU to help them regulate Airbnb, as they believe the platform is a barrier to affordable housing for full-time residents.
- In December 2019, Europe’s top court ruled that Airbnb cannot be treated as a real estate agency by regulators. The complaint was lodged by the Association for Professional Accommodation and Tourism (a hotel lobby). It claimed that the platform should face the same regulations as real estate providers.
- The ruling was an important win for Airbnb, especially since it is facing “increased regulation from lawmakers around the world who say short-term renters disrupt the local economy by driving up rent and pricing out longtime residents.”
Asian countries are also demanding registration
- In 2018, Airbnb was forced to remove 80% of its listing in because owners were not properly registered. In 2019, the platform started to recover, but is still being regulated.
- The Urban Redevelopment Authority in Singapore prohibits any short-term rentals of less than three months.
- The pandemic is profoundly affecting the hospitality industry, changing how contracts are negotiated, repurposing hotels, creating compliance issues, and modifying hotel management agreements. However, it is still too soon to determine if any of these trends have lasting power or impact beyond the pandemic, which is why they were excluded from the report.
- That being said, DLA Piper, a global law firm with offices in more than 40 countries, explains that “over the last few years, we have found that trends that started as a result of the financial crisis of the last decade have continued to develop. In many markets, the advent of recession made operators more risk-averse.”