Read Bottomline-2006-12_01.pdf text version


Inside: Structuring a business purchase as an "asset" or "entity;" U.S. immigration reform update; Trade name use in search engine marketing; Top 10 legal issues of online travel marketing; Review of the Save Our Small Business and Pension Protection Acts; Feature Profile: Richard Braa

www. HFTP. ORG · www.HITEC. ORG










Volume 21, Number 8

DECEMBER · 2006/JANuARy · 2007


HFTP® and HITEC® are registered service marks of Hospitality Financial and Technology Professionals. ProLinks and GUESTROOM 2010 are service marks of Hospitality Financial and Technology Professionals.

12 14 18 22 26

Basic Tax Considerations

By Barry K. Shuster, MBA, J.D., gives the pros and cons to structuring a business as an "asset" or an "entity."

Immigration Reform and the 110th Congress Search Engine Marketing

Individuals interested in submitting an article for publication should contact the editor. The Bottomline is a peer review journal. All materials submitted for publication are reviewed by members of the editorial review board or recognized experts in the field. The Bottomline (ISSN 0279-1889), the journal of Hospitality Financial and Technology Professionals, Inc., is published bimonthly with two special editions by HFTP®. Copyright © by Hospitality Financial and Technology Professionals. All rights are reserved. All opinions expressed herein represent the views of the authors. The Bottomline and HFTP disclaim any responsibility for views expressed or statements made in any articles published. HFTP disclaims any liability with respect to the use of or reliance on any such information. The information contained in this publication is in no way to be construed as a recommendation by HFTP or any industry standard, or as a recommendation of any kind to be adopted or binding upon any member of the hospitality industry. Written consent must be obtained from HFTP before reprinting articles. Subscription fee of $30 for HFTP members is included in the membership fee. HFTP is headquartered at 11709 Boulder Lane, Suite 110, Austin, Texas 78726. Periodicals Postage Paid at Austin, Texas. POSTMASTER: Send address changes to The Bottomline, 11709 Boulder Lane, Suite 110, Austin, Texas 78726, (512) 249-5333.

Submissions and Inquiries

Elise A. Healy, Esq., provides an update of recent U.S. immigration legislation and how it might affect the hospitality industry. Peter O'Connor, Ph.D., discusses the legal wrangling behind using trade names in paid search advertising, and why hotels should keep a close watch on their online brands.

Top 10 Legal Issues of Online Travel Marketing Feature Interview: Richard Braa

2006 HFTP Paragon Award Winner

Mike Heilbronner, Esq. and Sue Heilbronner give 10 ways hospitality professionals can protect their brands online more effectively and avert legal snares.


5 6 8 10 Between the Lines

HFTP Sets Goals for 2007 -- The association will expand member benefits and increase its global presence

Q&A From The HFTP Research Institute Chapter Profile: HFTP San Diego HFTP News and Notes

Workplace Law Update -- Save Our Small Business and Pension Protection Acts

Call for 2007 Annual Convention Speaker Presentations · CHAE and CHTP exam questions sought · HFTP Calendar of Events

The Bottomline

THE BOTTOMLINE STAFF Frank I. Wolfe, CAE Executive Vice President/CEO [email protected] Eliza R. Selig Editor/Director of Communications [email protected] Laura Huffman Advertising Sales/Marketing Account Manager [email protected] 2006­2007 HFTP OFFICERS President Agnes DeFranco, Ed.D., CHAE University of Houston Houston, Texas Vice President Anna McFarland, CPA, CFE, CHAE, CHTP Anna McFarland & Associates Kaufman, Texas Treasurer Jules Sieburgh, CHTP JSI Consulting Bethesda, Maryland Secretary Terry Price, CHAE, CHTP, CPA The Grove Park Inn Resort & Spa Asheville, N.C. Immediate Past President Ralph R. Miller, CA, CBV, CHA, CHAE Inntegrated Hospitality Management, Ltd. North Vancouver, B.C. 2006­2007 COMMUNICATIONS EDITORIAL ADVISORY cOUNCIL Chair Franklin John P. Sikich, CPA, CHAE Franklin John Patrick Sikich, CPA Board Liaison Karl Munster, CPA, CHAE HRI Lodging, Inc. Council Amitava Chatterjee, CHTP IBM Business Consulting Services Travel and Transportation Hosp and Leisure Ab M. Echenberg, CHAE, CHTP AME Consulting Mehmet Erdem, Ph.D, CHTP University of Nevada, Las Vegas Ted Horner E Horner & Associates Pty Ltd Peter O'Connor, Ph.D. ESSEC Business School Arlene Ramirez, MBA Conrad N. Hilton College, University of Houston Kevin F. Reilly, CPA, JD PKF Witt Mares Raymond S. Schmidgall, Ph.D., CPA, CHAE Michigan State University Jerilyn B. Schnitzel, CHAE, CHTP, CAM Schnitzel Hospitality Consulting Joseph Seminerio, MBA, CHAE, CHTP Baltusrol Golf Club Paul A. Willie, CFM, CHAE, CHTP, CHA, CMA Niagara College 11709 Boulder Lane, Suite 110 · Austin, TX 78726­1832 001 (512) 249-5333 · (800) 646-4387 · Fax 001 (512) 249-1533 ·

December 2006/January 2007


a letter from the president


The association will expand member benefits and increase its global presence


Agnes DeFranco, Ed.D., CHAE

...The board has three main goals: to continue current membership services, GUESTROOM 2010 and technology partnerships, and international association partnerships.

Agnes DeFranco, Ed.D., CHAE, is a professor at the Conrad N. Hilton College at the University of Houston in Houston, Texas.

006 ­ 2007 is indeed going to be a very exciting year for HFTP. In our strategic planning meeting this past winter, the board decided to continue the tradition and mission of HFTP which is for HFTP to be the authoritative source and resource for all hospitality finance and technology information. To that end, the board has three main goals: to continue current membership services, GUESTROOM 2010 and technology partnerships, and international association partnerships. First, your board understands that current membership is the most important constituency. Therefore, in the coming year, you will see a ProLinks software upgrade so that more exchange and communications can be achieved. We will also continue to work with chapters in need, as well as charter new ones. In 2005 ­ 2006, HFTP chartered five new chapters: the Central Virginia, Bay Area Club, Penn State Student, Australia and Asia Chapters. We hope to expand our services to more members in the coming year. To establish a forum for our rising stars, HFTP is developing a number of educational and professional opportunities for first-level staff. First, we are planning the brand new Assistant Controllers Conference for Spring 2007. In addition, we are creating a certificate in accounting and technology designed for firstlevel staff training, as well as for other personnel in hotels and clubs who need crossing-training in various accounting functions. This certificate will be powered by ProLinks, thus increasing the familiarity of HFTP and its resources for our next generation of assistant controllers and controllers. To help fit the training into busy work schedules, the certificate programs will be delivered via ProLinks, providing access in real-time and asynchronously so that your employees can use the course materials literally 24/7. HITEC 2006 and our GUESTROOM 2010 were so well-received this last year

that HFTP was asked to exhibit the model hotel room at the New York International Hotel/Motel & Restaurant Show this past November. Due to GUESTROOM 2010's success, we plan to update and display the room again at HITEC 2007, as well as add a new club technology pavilion. The 2007 HITEC Advisory Council, chaired by Director Brenda Burke, CHTP, met in early November to continue its detailed planning for the event. Don't miss HITEC 2007 in Orlando! It is going to be another great show. With the success of HFTP, many industry associations, both in the U.S. and abroad, are forming alliances with us. We are very pleased to announce that the 10th edition of the Uniform System of Accounts for the Lodging Industry is now available (find an order form on page 11). In addition to this project, HFTP is partnering with the Educational Institute of the AH&LA to offer online testing for our CHAE and CHTP candidates in early 2007. Our long-term partnerships with HSMAI and CMAA have also served our membership well. Internationally, we are working with our global partners, especially in Europe, to offer EHTEC -- European Hospitality Technology Educational Conference in February 19 ­ 20, 2007. In addition Director Phil Newman, CPA and Vice President Anna McFarland, CPA, CFE, CHAE, CHTP, will chair a task force to explore the feasibility of an International General Accounting Principles for the Lodging Industry with the International Hotel & Restaurant Association. As I think about all the new initiatives for this coming year, I expect an exciting time. I look forward to working with all of you and hope that I will have the pleasure and opportunity to visit with as many of you as possible in the coming year.

The Bottomline

HFTP News and Notes



Save Our Small Business and Pension Protection Acts

Question: I heard that there was an update to the Save our Small Businesses Act and that the U.S. government has approved more visas. Can you give me further detail on the extension of the act? Answer:

On September 30th, Congress approved a one-year extension for the Save our Small Businesses Act, which was due to expire on September 30, 2006. The Act has now been extended through September 30, 2007. Under the extension, "the U.S. Citizenship and Immigration Service will continue to allow the exemption of existing visas from the current-year quota, thus freeing up as many as 40,000 additional visas for use by the business community" (National Club Association [NCA], October 4, 2006). The 40,000 additional visas are due to an exemption for seasonal workers who have worked under the H-2(b) visa program in any one of the three previous years. All together, the Act provides an annual allotment of 66,000 H-2(b) visas. In the past, visas were awarded on an annual basis, so those who applied first were given the visas. This proved to be difficult for companies that needed to hire workers later in the year because one of the restrictions was that companies could not apply for a visa until four months prior to the employee's start date. Employers in the South experienced the most difficulty since their seasonal workers needed to be hired during the winter months. This dilemma was remedied with the exten December 2006/January 2007

sion because the 66,000 H-2(b) visas are being divided into two portions, "with 33,000 being reserved for the first half of the fiscal year and the remaining distributed in the second half of the fiscal year" (AH&LA, September 30, 2006). During 2006, immigration has been at the forefront of many political discussions. It is likely that many of the estimated 11 million undocumented aliens in the United States work in the hospitality industry. The National Restaurant Association approximates that 625,000 of the undocumented workers are employed in restaurants, which accounts for one in 20 foodservice workers (Brooks, May 2006). The government has assisted with the labor shortage by extending the Save our Small Businesses Act, but there does not seem to be a long-term fix in sight. As long as there are not enough individuals in the United States to fill positions in the labor-intensive service industry, employers will have to look elsewhere. (See "Immigration Reform and the 110th Congress," on page 14 for more details on current immigration legislation.)

Question: I heard that there was a law passed this year to assist employees with their pensions. Can you give me any details on this law? Answer:

Yes, on August 17th President Bush signed the Pension Protection Act which is designed to strengthen pension programs and avoid under-funded employee retirement plans. The act requires companies to make necessary contributions to under-funded plans and make them

financially whole within seven years (NCA, August 10, 2006). Employers with under-funded pension plans are unable to increase benefits while making payments to bring the plans to a viable level. The Federal government has created an insurance system to help support businesses that are unable to make designated pension payments to their employees. This act is supposed to relieve some of the burden by forcing companies to fully fund pensions to their employees. According to the Office of the Press Secretary the legislation: · Requires companies that under-fund their pension plans to pay additional premiums; · Extends a requirement that companies that terminate their pensions provide extra funding for the pension insurance system; · Requires that companies measure the obligations of their pension plans more accurately; · Closes loopholes that allow underfunded plans to skip pension payments; · Raises caps on the amount that employers can put into their pension plans, so they can add more money during good times and build a cushion that can keep their pensions solvent in lean times; and · Prevents companies with under-funded pension plans from digging the hole deeper by promising extra benefits to their workers without paying for those promises up front. (Office of the Press Secretary, August 17, 2006) The Pension Protection Act also assists those contributing to a defined contribution plan. The legislation: · Removes barriers that prevent companies from automatically enrolling their employees in defined contribution plans;

· Ensures that workers have more information about the performance of their accounts; · Provides greater access to professional advice about investing for retirement; · Gives workers greater control over how their accounts are invested; and · Makes permanent the higher contribution limits for IRAs and 401(k)s that were passed in 2001, enabling more workers to build larger retirement nest eggs. (Office of the Press Secretary, August 17, 2006) In order to fully understand a pension plan, we first need to define the difference between a pension plan which is considered a defined-benefit plan and a defined contribution plan such as a 401(k) plan. The defined-benefit plan provides a retiree a specific amount based on the employees salary and years of service. In this case, the employer bears most of the risk because they are guaranteeing retirees a certain amount of money. Contributions to this type of plan can be made by the employee, employer, or both (Defined benefit plan, n.d.). On the other hand, the risk for a defined contribution plan is on the employee. Employees can defer some amount of their income into these plans which oftentimes is matched by their employer at a certain percentage (Defined contribution plan, n.d.). IRAs and 403(b)s are also considered a defined contribution plan. For further information about the Save our Small Businesses Act or the Pension Protection Act contact the HFTP Research Institute. Information in this article is provided to give a general overview of the Save our Small Businesses Act and the Pension Protection Act. For specific information on a particular situation competent professional advice should be sought to address individual company issues.

· Defined Benefit Plan. (n.d.). Retrieved November 14, 2006, from · Defined Contribution Plan. (n.d.). Retrieved November 14, 2006, from · National Club Association. (2006, August 10). Senate Passes Pension Reform Bill While Minimum Wage Fails. Retrieved October 5, 2006, from 0HOme%20Page/reformbill.asp. · National Club Association. (2006, October 4). Congress Passes NCAsupported H-2b Visa Legislation. Retrieved October 5, 2006, from 0Home%20Page/H2B%20visa%20vict ory(rev).asp. · Office of the Press Secretary. (2006, August 17). Fact Sheet: The Pension Protection Act Of 2006: Ensuring Greater Retirement Security For American Workers. Retrieved October 20, 2006, releases/2006/08/print/20060817.html.

2006 HFTP Compensation & Benefits Survey

Regional Analyses Available

Regional and industry analysis has been posted on the HFTP web site at Regional analysis is available for club properties in the East North Central, Middle Atlantic, Pacific, South Atlantic and west South Central regions of the United States. Regional analysis is also available for hotel and resort properties in the Pacific, South Atlantic, and west South Central regions. we want to thank everyone who participated in the survey and made it a success! Contact Information: Tanya Venegas, MBA, MHM HFTP Research Institute Ph: (713) 743-1839 or (866) 572-4387 Fax: (713) 743-2548 E-mail: [email protected]


· AH&LA. (2006, September 30). Lodging Industry Priorities Approved By Congress: Seasonal Worker Relief Extension and Travel Requirements Reform Pass. Retrieved October 5, 2006, from view_advisory.asp?mstr=292. · Brooks, Steve. (2006, May). Immigration Shuffle. Restaurant Business, 105(5). Retrieved October 20, 2006, from EBSCO Hospitality & Tourism Index.

The Bottomline 7

HFTP News and Notes




Celebrating 25 Years


he HFTP San Diego Chapter has just celebrated its silver anniversary, having adopted its bylaws in October 1981. While no original chapter members remain active, many of its approximately 86 members have been with the chapter for over 10 years. The make-up of the chapter provides a representative example of HFTP membership overall. Members include a mix of hotel controllers and I.T. professionals who work at a wide range of property types, from four star luxurious resorts to small, limited service properties. In addition, the chapter includes a fair amount of club controllers, as well as a few vendors to round out the mix. Their home base of San Diego is California's second largest city, blessed with year-round warm, sunny weather and bordered by Mexico, the Pacific Ocean, the Anza-Borrego Desert and the Laguna Mountains. Over the last few years, the city's economy has been strong, with a growing convention industry and rising business hotel occupancies. Just like its locale, the chapter remains vibrant. The chapter's monthly meetings

HFTP San Diego's 2006 ­ 2007

President: kevin J. Clark, CHAE CFO/Controller Four Points by Sheraton Hotel Vice President, Speakers: Terra Saltzman Executive Recruiter Ajilon Finance Vice President, Locations: Michelle Feist MIS Manager Manchester Grand Hyatt

are well-attended, always featuring an informative speaker. Recently the meeting speaker Dan Fumai, the vice president and controller of the San Diego Padres, entertained a full house, with descriptions of what it's like to manage the accounting for a professional HFTP San Diego Chapter's board of directors pose with event speaker Dan Fumai, vice president and controller for the San Diego Padres sports franchise. (center). Pictured (l to r) Terra Saltzman, vice president, speakers; In addition, the chapRobyn Hennon, treasurer; Kelly Williams, secretary; Kevin J. Clark, CHAE, president; Michelle Feist, vice president, locations; and ter hosts two annual Brian Blake; membership recruitment chair. social events. Every July, the chapter hosts a day at the Del Mar is planning to hold a CHAE (and possibly Racetrack. It also hosts an annual holiday a CHTP) review and exam session. It is social in December, when the chapter also planning a joint meeting with either combines fun and charitable work. The the Southern California Desert Chapsocial features a toy drive, collecting unter and/or the Los Angeles and Orange wrapped toys, which has a donation box County Chapters. that overflows every year. The toys are To support the next generation, the donated to a pre-determined charity, and chapter holds a monthly raffle, with the this year the toys will go to the Ronald proceeds going towards a scholarship McDonald House Charities, which has a fund. The scholarship is given annually to strong presence in San Diego. an accounting student at either San Diego In addition to regular meetings, State University or The University of the chapter works on several projects California, San Diego. throughout the year. This year, the chapter While the last official member count was 86, membership fluctuates between 80 ­ 93 members, and the chapter hopes Board of Directors to reach 100 members within the next two years. The chapter's membership recruitTreasurer: ment chair helps direct its recruitment Robyn Hennon efforts, and is typically an accounting job Manager of Accounting placement specialist -- an individual who Coronado Yacht Club is in contact with many potential members. This year the chapter is working Secretary: on a recruitment program to encourage kelly Williams mid-level staff, such as assistant controlController lers and income auditors, to join HFTP to Hilton San Diego Gaslamp further their career and education. Membership Recruitment Chair The chapter has plenty to celebrate 25 Brian Blake years after its charter -- an active memInternship Director bership and a good combination of educaHospitality & Tourism Department, tion, social activities and charitable works. San Diego State University Congratulations HFTP San Diego!

December 2006/January 2007

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HFTP News and Notes




Submit a presentation proposal for HFTP's Annual Convention

While it seems like the 2006 HFTP Annual Convention & Tradeshow has just ended, the HFTP Education Advisory Council is already starting to plan for 2007. The convention is a once-a-year opportunity for hospitality finance and technology professionals to get practical information about all aspects of their profession. In following with HFTP's commitment to provide quality educational programming, the council is encouraging members, educators and industry practitioners to submit presentation proposals to be considered for the 2007 Annual Convention education program. This year, the convention will be held October 17 ­ 20 william F. wernersback, CPA, CFE, at the Hyatt Regency Jacksonville Riverfront in Jackson- senior managing director for Club ville, Fla. If you have significant knowledge on a relevant Consultants, LLC, at the 2006 Annual Convention in Vancouver, B.C. hospitality industry topic, consider submitting a session proposal. Some examples of past sessions include: Maximizing Minimums and the Club Food & Beverage Environment, Planning Strategic Planning, I.T. Boot Camp and The Foreign Labor Solution. Because HFTP is a non-profit organization, it is important to note that individuals whose outlines are accepted for presentation will be responsible for their own expenses incurred by participating in the convention. HFTP will, however, provide complimentary meeting registrations for event speakers. Submissions must be submitted by Friday, February 9 and will be reviewed by the HFTP Education Advisory Council. All presentations must be nonproprietary and educational in nature, not sales or product specific. Please note: submitting an outline does NOT guarantee a slot on the Annual Convention & Tradeshow education program. Submission Requirements: · Submit a session title and a two to three sentence session description; · Indicate if the proposed session is for the Club, Hotel, Technology, General or International Track;

C aleNDar

For more information about HFTP events and CHAE/CHTP reviews and exams, please call (800) 646-4387 or 001 (512) 249-5333, or visit European Hospitality Technology Educational Conference (EHTEC) February 19 ­ 20, 2007 Hilton Amsterdam Amsterdam, The Netherlands CHAE & CHTP Exams March 18, 2007 The Ritz-Carlton New Orleans New Orleans, La. Club and Hotel Controllers Conference March 19 ­ 20, 2007 The Ritz-Carlton New Orleans New Orleans, La. Assistant Controllers Conference Spring 2007 Club and Hotel Controllers Conference June 25 ­ 26, 2007 Orange County Convention Center Orlando, Fla. HITEC 2007 June 25 ­ 28, 2007 Orange County Convention Center Orlando, Fla. 2007 HFTP Annual Convention & Tradeshow October 17 ­ 20, 2007 Hyatt Regency Jacksonville Riverfront Jacksonville, Fla. HITEC 2008 June 16 ­ 19, 2008 Austin Convention Center Austin, Texas 2008 HFTP Annual Convention & Tradeshow September 24 ­ 27, 2008 Gaylord Opryland Resort and Convention Center Nashville, Tenn.

· Include speaker's contact information; · Attach biographical information and other supporting documentation.

E-mail submissions to Linnet Hosek, HFTP meetings and events manager at [email protected] assuring receipt no later than 5 p.m. (CST) on Friday, February 9, 2007.


In an effort to enhance the CHAE and CHTP certification programs with up-to-date concepts in the hospitality industry, HFTP is inviting active CHAE and CHTP members to write proposed exam questions to be used on the CHAE and CHTP exams. If you would like to participate in this opportunity, HFTP would be honored to send a letter of recognition for your dedication to the CHAE & CHTP programs.

10 December 2006/January 2007

Visit the Certification page on the HFTP web site at for details.

NOw AvAilAble!

Uniform System of Accounts For The Lodging Industry 10th Revised Edition

The much-anticipated Uniform System of Accounts For The Lodging Industry, Tenth Revised Edition, is now available! This new book establishes standardized formats and account classifications to guide individuals in the preparation and presentation of financial statements for lodging operations. In a philosophical shift, this edition focuses on only the basic financial statements and the operating statements and does not allow for alternatives in the summary operating statement or the departmental statement/schedule presentations. Other changes to this edition include content and format modifications for both the financial and operating statements, reflecting changes in generally accepted accounting principles since the ninth revised edition. Changes include: · Account titles altered to reflect typical lodging terminology · Summary Operating Statement allows for only four sources of revenue · More guidance concerning resort fees, wholesaler sales, mixed-use properties, and allowances · Increased detail on expenses for all department schedules · New schedule for Employee Cafeteria · New ratios on gross operating profit, income before fixed changes, and net operating income This publication is the result of cooperation among the Hotel Association of New York City, the Educational Institute of the American Hotel & Lodging Association, and the Hospitality Financial and Technology Professionals. AH&LA & HFTP Members: $44.95 Non-member: $63.95 (Promo Code: USAHF) For quantity discounts, please contact the Educational Institute of AH&LA. ORDER TODAY! Uniform System of Accounts for the Lodging Industry (Tenth Revised Edition); 659TXT10 Qty: ______ x ______________ (unit price) = Subtotal: Shipping (7%): TOTAL: ___________ ___________ ___________


Payment Date Ordered: ______________________________________________________ Phone #: __________________________________________________________ Cardholder Name (print): _____________________________________________ Credit Card (check one): Visa MC AmEx Discover Expiration Date: _____________________________________________________ Credit Card #: ______________________________________________________ Cardholder Signature: ________________________________________________ Ship To Name: ____________________________________________________________ Company: __________________________________________________________ Address: ___________________________________________________________ City: _______________________ State: __________ Zip: __________________ E-mail: ____________________________________________________________

FL and MI Sales Tax (6%): ___________ (800) 752-4567 · (517) 372-8800 Fax: (517) 372-4104 Outside the U.S. and Canda, call (407) 999-8100

Tax Law


Structuring a business purchase as either an `asset' or `entity'

By Barry K. Shuster, MBA, J.D.


any independent restaurateurs get started in this business by purchasing existing restaurants through brokers or by responding directly to advertisements from sellers looking to cash out or retire. One of the important questions facing any small business purchaser is whether to buy just the assets of a business (an "asset purchase"), or the business entity itself (an "entity purchase"). In an asset purchase -- just as it sounds -- the buyer purchases the business's equipment, inventory, rights to use its name, etc. Most often, the buyer creates a new entity, typically, an S corporation (S-Corp) or limited liability company (LLC) to operate the business going forward. In an entity purchase, the buyer purchases the business entity itself by acquiring all of the selling corporation's or LLCs shares. In many cases, the seller will push the buyer to purchase the entire entity, since the seller's profits are considered 100 percent capital gains (assuming he is not selling at a loss). Capital gains are taxed at a lower rate than ordinary gains. On the other hand, if the seller sells just the assets, some of the gain may be ordinary, and some may be capital, depending on the assets. Not every asset's sale proceeds are eligible to be taxed as capital gains or loss. In any event, for the seller, tax planning in an asset sale is usually more complex than in an entity sale. From the buyer's perspective, an asset purchase is often preferable for a variety of reasons. One, an asset purchase

insulates the buyer from assuming many of the potential liabilities of the previous owner. From a tax standpoint, one of the advantages of an asset purchase to the buyer is that he would receive "full cost basis" for assets purchased. This is often the major influencing factor for the buyer, and the focus of this article. As you can see, the "asset vs. entity" issue can become a negotiating point (although, hopefully, not a deal-breaker). Ideally, both parties come to the table having reviewed both scenarios with their accountants; however, this may not be the case.


Imagine that a single shareholder owns all of the stock of Downtown Restaurant Group, Inc. (DRG, Inc., doing business as the Downtown Grill), a corporation in which he has invested $100,000. In accounting terms, the tax "basis" in his stock is $100,000. ("basis" refers to the original cost of an asset less depreciation. The resulting amount is used to determine gains or losses for tax purposes.) Depending on how much time has passed since DRG, Inc. purchased the assets, they might be fully depreciated. In that case, we would say that the shareholder's "outside basis" for his stock is $100,000, and that the corporation's "inside basis" for its assets is $0. If this shareholder wanted to "liquidate" DRG, Inc., (i.e., sell off all its assets) he would be subject to tax on $100,000, which represents the $100,000 value of the corporation's assets, less the

corporation's "inside" basis of $0. This would be true whether the corporation sold its assets for cash and then dissolved, or whether the corporation dissolved and then all of its assets were distributed to the shareholder. If a buyer purchased DRG, Inc. as an entity (i.e., purchased all of the stock of the corporation), he would "step into the shoes" of the selling shareholder, and would be subject to this same tax result. So if the buyer later liquidated the corporation, the buyer would be subject to tax on this same $100,000 amount of gain. The more immediate, and perhaps significant, tax consequence to the buyer is that he would be unable to depreciate the assets. Again, he steps into the shoes of the seller, who has already fully depreciated the assets. If, however, the buyer bought the assets of the corporation instead (rather than purchase the corporation as an entity) for $100,000, then he would have a full $100,000 basis in these assets and would not be subject to any taxable gain. He could form a new entity and transfer these assets to that entity. In tax terms, the new entity's inside basis and the buyer's outside basis in its stock would now both be $100,000. The buyer could begin taking full depreciation on all of the assets purchased, and can dispose of these assets without having to pay tax on any untaxed gain accumulated while he held them. The immediate and future tax savings to the buyer realized by purchasing the business's assets, rather than the entity itself, could be significant.

Barry K. Shuster is a member of the North Carolina state bar and serves on the faculty at North Carolina Central University School of Business, where he teaches hospitality law and ethics. He can be reached at [email protected] For additional information go to 12 December 2006/January 2007

Sometimes It Doesn't Make a Difference Tax-Wise

In some cases, the "asset versus entity" question is a non-issue for tax purposes. For example, let's say the business being purchased is a sole proprietorship. The owner is a person who owns all the assets of the business and simply files a Schedule C on his tax return. Since a proprietorship is not deemed to be a separate entity from its owner, unlike a corporation or LLC, the purchase of a proprietorship is treated as an asset purchase for tax purposes, by default. Simply put, there is no entity to purchase in such a case. A similar result could occur when the buyer is purchasing a single-owner LLC, in which the owner is an individual (as opposed to a single-owner LLC that is, in turn, owned not by an individual person but by another LLC or a corporation). That's because the IRS generally treats a single-owner LLC as a "disregarded entity" for tax purposes, as if it did not exist separately from its owner. So, if

TAT_MAPP Ad_4.qxd 11/1/06 10:10 AM

the one owner is an individual, and you disregard the LLC, then you are left with a sole proprietorship, at least for tax purposes. Thus, even if you purchased the LLC itself (i.e., its shares, rather than its assets), the purchase is treated as an asset purchase, for tax purposes, by default. But what if the business you're buying is a corporation with one owner who is an individual? Here's a situation in which LLCs and corporations differ tax-wise: The IRS never treats a corporation as a disregarded entity for tax purposes, not even a single-individual shareholder S-Corp. As far as the IRS is concerned, a corporation is always "separate" from its owner shareholders, and is never automatically an asset purchase, as it would be in the purchase of a single, individual-owned LLC. So when purchasing a corporation, regardless of the number of shareholders, the buyer will probably need to structure the deal as an asset purchase to get full basis of the assets.

Page 1

The Purchase of a Subsidiary Complicates this Matter

A business entity might be owned not by individual shareholders or members, but as a subsidiary of another entity. For example, ABC, LLC, a holding company, might own XYZ, LLC, a restaurant business. Therefore, when purchasing a restaurant, the buyer needs to know who or what owns the target business in the transaction to determine the tax ramifications of his purchase. The organization of the owner of the business can affect the inside and outside tax bases of the seller's assets and the buyer's tax exposure, if and when the buyer decides to liquidate the business. It is always valuable, but especially in these complicated cases, for the buyer to seek counsel and representation by both a transactional lawyer and a CPA or tax specialist when contemplating a business purchase.

Note from the author: this article is for general information only and should not be used as a substitute for qualified legal and tax advice.

Hot seat.

Item # Category Item Quantity Size Condition Life span 25 Upholstered Furniture Arm Chair 1 Each 26" x 28" x 38" Good 5 years

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The Bottomline




What the Hospitality Industry Can Expect

By Elise A. Healy, Esq.

hen it adjourned last summer, the 109th U.S. Congress was deeply divided on immigration. The U.S. House passed a strong "enforcement only" bill and the U.S. Senate a more "comprehensive immigration reform" bill, but neither side would compromise. Just before the November elections, the Congress passed and the President signed into law a bill authorizing construction of a 700 mile fence along the southern border -- but no funds were appropriated to acquire the land and build it. Many question whether the fence will ever be built. The Democratic party's slight majority in the House and Senate may offer the hospitality industry some hope that a reasonable compromise on immigration reform will be achieved in 2007. The President favors reform with a "path to citizenship" for unauthorized aliens, as do some powerful Democrats in both the House and Senate. Many, but not all, of the candidates who favored the "enforcement only" approach lost in November. But several restrictionist immigration initiatives passed at the state level, including those in Arizona and Colorado. Politicians seeking meaningful legislative achievement on immigration before the run up to the 2008 elections will be cautious, despite President Bush's statement that he sees immigration as an area where he and the Democratic Congress can find "common ground."


What can the industry expect? Will any of the Senate reforms be resurrected? What are the chances for legalizing the large numbers of hospitality industry workers who lack valid work authorization? What about improvements to the H-2B seasonal worker program? And will Immigration & Customs Enforcement (ICE) continue its focus on prosecuting "egregious employers"? What should hospitality industry employers know about ICE's IMAGE program? This article offers some insights into these critical issues.

only the principal alien would be counted, up to a maximum of 650,000 annually · Allocate up to 30 percent of employment-based visas would be reserved for low-skilled workers

Enforcement: The Beat goes On

Both the Senate bill (S.2611) and the House bill (HR 4437) had strong border and interior enforcement provisions, the House bill being limited to enforcement. Any immigration bill the 100th Congress passes will most likely continue the emphasis on enforcement, with provisions like these: · Big increases in border patrol officers -- 2,000 in the Senate bill, 3,000 in HR 4437 -- in each fiscal year from 2007 through 2011 · S.2611 would require the Department of Homeland Security to build a "virtual fence" consisting of unmanned aerial vehicles, remote sensors and other advanced technology · Both bills make unlawful re-entry after removal and unlawful presence "aggravated felonies," subjecting the aliens to criminal prosecution (and accompanying right to counsel) and permanent debarment

Continued on page 16.

Comprehensive Immigration Reform: It's Back

The Senate's approach to immigration reform was S.2611. It included everything any interest group ever wanted, from increased border and interior enforcement to a huge increase in the number of permanent visas. It will probably form the basis for any debate on immigration reform in 2007. From the standpoint of the hospitality industry, S.2611 contains some important provisions. For example, it would: · More than triple the number of employment-based visas in the annual quota, from 140,000 to 450,000 for fiscal 2007 to fiscal 2016, dropping to 290,000 in FY2017 · Remove the spouses and minor children of employment-based immigrants from being counted toward the quota;

Elise A. Healy, Esq. heads the immigration practice at the Dallas, Texas office of Epstein Becker Green Wickliffe & Hall, P.C. Contact Ms. Healy at [email protected]


December 2006/January 2007

Lodging Hospitality Magazine & BearingPoint Consulting Present

Hospitality Operations & Technology

March 14-16, 2007 · Dallas, Texas

S t r a t e g i c

C o n f e r e n c e

o n


Save the dates of March 14-16, 2007 for the 7th Annual Strategic Conference on Hotel Operations & Technology. This year more than 60 high caliber speakers --a who's who of the industry representing major brand, hotel and hospitality companies -- will answer your questions at our HOT Conference. They will address everything from how in-room entertainment will look and feel and how to buy it -- to how to use technology to gain a competitive edge and build brand loyalty. HOT `07 will feature: k Well-timed and relevant key sessions and roundtables k Step-by-step actionable ideas k Discussion of the latest trends and most practical strategies k Answers on how to cut costs, run properties more efficiently and produce even greater profits k Unique opportunities to interact with people who are driving the hospitality industry Luncheon Speaker

MIKE LEVEN has left the lodging industry after nearly 50 years to become a philanthropist, joining Atlanta charity Marcus Foundation as vice chairman. Mike has a rich history in the hotel industry and will be sharing his stories and insights with us. This will be a must-attend luncheon speech that you will refer to time and time again.

Some HOT Speakers:

Tom Keltner

Jay Witzel

Bob Morse

President Brand Performance & Development Group, Hilton Hotels Corp.

President & CEO, Carlson Hotels Worldwide

COO, Noble Investment Group

Don Semmler

Executive Vice President Central Region, Marriott Lodging




Tim Harvey

EVP & CIO, Hilton Hotels Corp.

Dwight Smith

SVP & CIO, Marriott Vacation Club International

Roger Bloss

Nelson Garrido

VP of IT, Noble Investment Group

CEO, Americas Best Value Inn/ Vantage Hospitality Group



hotel company chief operating officers discuss and debate the key issues facing the lodging industry.

COOs Check In. An all-star panel of





CIOs Check In.

A panel of CIOs will discuss a range of topics including their changing relationships with thirdparty providers.

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Continued from page 14.

· Both would also make it a criminal offense to assist, induce or facilitate an alien in "coming to" the U.S., knowing that the alien is unauthorized, or in "reckless disregard" of that fact -- a significantly broader provision than current law, and one that arguably could be applied to employers. The hospitality industry can expect that Immigration & Customs Enforcement (ICE) will continue its focus on worksite enforcement. In fiscal 2006, ICE arrested over 700 on criminal charges, including employers, and more than 3,300 on administrative immigration charges. It removed more than 186,000 aliens and confiscated assets of nearly $42 million, doubling the asset forfeitures of FY2004.

... Hospitality industry employers risk falling into ICE's investigative net if they fail to respond correctly and timely to "Social Security mismatch" letters or their immigration compliance practices are lax.

age them to follow "best practices" in hiring and to self-police their immigration compliance. So far, IMAGE is voluntary. But certain aspects of it -- like enrolling in the online employee eligibility verification service known as "Basic Pilot" -- are almost certain to become mandatory in 2007. Hospitality industry employers who are not sure whether immigration compliance procedures are being followed at every location should carefully consider some of the "best practices" that the IMAGE program encourages. These include: · Auditing immigration compliance (Form I-9), using an outside auditor or an employee who is not involved in compliance; · Establish robust protocols for responding to Social Security Mismatch letters; · Develop and use I-9 training programs, including how to recognize counterfeit documents; and · Develop and use immigration compliance quality assurance protocols. Few employers in any industry may be interested in some of the other requirements to obtain IMAGE "certification" from ICE. These include submitting to an I-9 audit by ICE and implementing a "tip line" for employees to report questionable hiring practices. Many employers object to enrolling in "Basic Pilot," because of concerns over its high percentage of "false negatives." However, the other practices mentioned above make sense and may help an employer head off an ICE investigation. (For more details, see

"ICE Takes a New Approach," by Elise Healy, Esq. on page 16 in the August/September 2006 issue of The Bottomline.)

H-2B Visas for the Temporary "Seasonal Worker"

Many in the hospitality industry know and loathe the awkward, slow and limited H-2B program, which permits up to 66,000 temporary workers to enter the U.S. annually during peak seasons for occupations including landscaping, kitchen and waitstaff, housekeeping, etc. Returning H-2B workers from prior years are not included in the 66,000 quota, at least for the next year. This is because the H-2B "returning worker" provision was extended for another year, when President Bush signed the National Defense Reauthorization Bill on October 26, 2006. The uncertainty surrounding the H-2B program is one of its chief weaknesses. Others include the excessive time and money involved in advertising for jobs for which there are few willing U.S. workers. Using the program requires testing the labor market for the availability of U.S. workers to the satisfaction of the Department of Labor; filing a petition with the U.S. Citizenship and Immigration Services' and then hoping that the US consulate will actually issue the visa in time for the season. The employer cannot be sure until the last moment whether or not H-2B visa holders will be able to work during peak times. And of course, the process must be repeated each year. Many improvements to the H-2B program have been proposed, including developing a central online job registry that would permit the Department of Labor to determine efficiently whether or not U.S. workers are available for these seasonal and peak need jobs. Thus far, none have made it through the legislative process. It remains to be seen whether the new Congress has the political will to bring the H-2B program, and the rest of the U.S. immigration system, into alignment with 21st century business and labor market realities. If immigration has gone from being "political suicide" to "common ground" for the President and Congress, perhaps there is hope yet.

Social Security Mismatch Letters

These ICE worksite enforcement actions focus primarily on "egregious" employers who engage in abusive labor practices. However, hospitality industry employers risk falling into ICE's investigative net if they fail to respond correctly and timely to "Social Security mismatch" letters or their immigration compliance practices are lax. Last June, ICE proposed a new regulation in this area. Essentially, the rule requires employers to respond to a Social Security mismatch letter within 63 days, either by correcting its own records or by requiring the employee to present new employment eligibility verification documents. If the worker fails to do so, the employer must terminate the employment. Employers who do not terminate the worker in this situation will be deemed to have constructive knowledge that the worker is unauthorized. Conversely, employers who follow this procedure will be in a "safe harbor" and will not prosecuted for violating the Immigration Act, even if the worker turns out to be unauthorized.

IMAgE: ICE Mutual Agreement Between government and Employers

ICE has requested over $41 million for worksite enforcement in FY2007. In response to employers who want to know how to avoid hiring unauthorized aliens, ICE has developed a program to encour-


December 2006/January 2007


· Largest industry expo · Cutting-edge education · Network with the industry's best and brightest

Register before February 2, 2007 to take advantage of the early bird registration rate.



For more details or to register, visit or call (202) 371-6700.

Signature Hcareers · Holiday Systems International (HSI) · iBAHN · Interval International Sponsors* Orange Lake Resort and Country Club · RCI Global Vacation Network · Starwood Vacation Ownership · Textron Financial · VacationGuard, Inc. · Whirlpool Corporation

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Online Marketing


The legal wrangling behind using trade names in paid search advertising

By Peter O'Connor, Ph.D.


ccording to DoubleClick nearly 70 percent of travel purchasers begin their travel planning by searching for destinations, activities or even hotel names on a search engine such as Google, Yahoo or MSN. From a vendor perspective, search engine traffic is perceived as being very valuable. Such visitors have already entered highly-specific keywords into the search engine to find the site, have selected it from others displayed on the results page, and thus can be assumed to have at least some interest in the site's product. They also tend to convert well into sales as they are effectively in "hunt mode" and not just randomly browsing. Thus, having good positioning in search result listings is essential. However few hotels are actively managing their positioning in such results, allowing customers to be hijacked by competitors or unscrupulous intermediaries, in many cases by exploiting the hotel's trade name. To be successful, search engines must consistently give users relevant answers to their queries. They do this by constantly updating and expanding their database of indexed pages using "spiders" -- software programs that crawl and categorize pages on the web. By optimizing the design of their pages to conform to these classification algorithms, web sites can attempt to manipulate their positioning in search results for certain keywords. However, as the classification criteria

used are both secret and continuously evolving, there are no guaranteed results. One day a page may be first on a result listing and the next it may be on page 12 where no one will ever find it! Despite doing everything possible, others may continue to hog the lucrative top spots as on most engines, advertisers can bid on specific keywords so that their listings are displayed first -- before the results of the organic search. Such sponsored matches overcome many of the limitations of organic optimization, as they effectively guarantee visibility under the desired keywords, appear instantly, are not affected by changes in the ranking algorithm, and can be precisely targeted to increase the likelihood of deliver targeted traffic. It's no wonder that paid placement has become the online marketing strategy of choice; accounting for approximately 83 percent of global SEM spend in 2005.

Hotel and Search

DoubleClick claim that search plays a role in approximately 75 percent of online travel purchases, considerably higher than the estimated 50 percent for e-commerce in general. Over 50 million U.S. consumers research travel online each month, with nearly one-third subsequently purchasing within eight weeks -- mostly, but not exclusively, through online channels. Search is regarded as highly relevant and useful; most users are

either satisfied or very satisfied with their use of web search for travel planning. It is also effective at attracting incremental customers. In a U.K. study, ComScore noted that 39 percent of respondents visited a travel site they had not planned to visit and 25 percent considered a new brand as a result of their placement at the top of search results. While most searches involve generic terms, for travel the use of brands becomes very prominent close to the actual purchase, peaking in the session in which the sale actually occurs. DoubleClick claim that buyers start their searches with generic terms, but rely on branded searches to find sites in the period leading up to purchase. Thus favorable positioning in search result listings for a hotel's trade name is essential, but one of my recent studies reveal some worrying issues. While empirically assessing the performance of hotel web sites in search results listings1, I found that while hotel web sites in general were performing well in organic search results (appearing first in nearly two-thirds of cases, and on the first page in another one-fifth of cases), such listings were usually preceded by or surrounded by paid third-party listings. Based on the methodology used to carry out the study, the only possible cause was that these third parties were bidding on the hotels' trade names in order to appear in search results and poach customers,

Peter O'Connor, Ph.D. is an academic director, IMHI at the ESSEC Business School in Paris. O'Connor is also a member of the HFTP Editorial Advisory Council. 1 December 2006/January 2007


· CHAE and CHTP exams offered online through AH&LA's Educational Institute · Brand new test questions based on current business practices for both the CHAE and CHTP Exams

a theory supported by the fact that most adverts were either for online intermediaries or competing hotels. Many of these adverts also used the hotel's trade name in their headings or editorial copy, again possibly in an attempt to poach business from the hotels in question. From the hotel's perspective, such practices are clearly worrying. What precisely can be done to stop this?

The Legal Perspective

Sponsored listings work by allowing advertisers to competitively bid on keywords for favorable positioning on search result pages. For example, to appear in the top position for "Cheap New York Hotels," an advertiser might agree to pay 25 cents per click. If no one else offered to pay more, then they appear in the number one spot when searchers enter this phrase. If someone else later decided to pay 26 cents, then they would fall into the number two position, unless they changed their bid to 27 cents. In theory, advertisers can bid on any search term. However bidding on another company's trade name is controversial. In such cases, trade name owners argue that consumers are searching for their specific products, and that allowing such bidding means that the resulting bias may cause the sale to be made indirectly (thus necessitating the payment of an unnecessary mark-up or commission) or even diverted to competing products and lost. Legal guidance comes from case law on trademarks in meta tags. Competitors sometimes include trade names in their meta tags (invisible lines of HTML code used for classification by visiting spiders) in an attempt to try to appear alongside or above the owner's site in search results listings. Such practices have consistently been found to be unlawful based on an initial-interest-confusion argument (see Brookfield Communications Inc v. West Coast Entertainment Corp). The courts argue that consumers viewing results influenced by infringing meta tags could be distracted or diverted based on the belief that the site is associated with the original site sought, comparing the practice to a misleading billboard misdirecting consumers to exit a highway at the wrong place. Similar rulings in other jurisdic20 December 2006/January 2007

Monitoring and protecting a company's online brand is time consuming, but essential. Audits need to be conducted frequently, examining both paid and organic search results for evidence of people trying to profit from trade names.

tions have made it clear that using trade names to lure searchers away from an owner's web site is unacceptable. Sponsored search follows similar logic (see for example, Nissan Motor Co. Ltd v. Nissan Computer Corp). When third parties bid on, and/or use trade names in their advert text, they are clearly trying to appear in results listings for terms that belong to the trade name owner. In such cases, the owner can take action against the advertiser to prevent further infringement and recover damages for lost business. However actually doing this can be problematic. Finding the offender can be difficult since domain name registrations can now legitimately hide the owner's contact details, and sites may be deliberately registered in foreign countries where enforcement is challenging. Search networks have in the past refused to police trademark abuse, arguing that it is advertisers who are abusing the system and that problems must be resolve directly with them. However Yahoo! Search Marketing recently announced that it will no longer permit keyword bidding on trade names. Google, on the other hand, actively promotes trade name terms as keyword triggers in the U.S market. This policy has been legally challenged (see GEICO v. Google Inc. and Overture Services). Unfortunately, the plaintiff failed to prove customer confusion and the court concluded that initial interest confusion was less likely in the electronic world. Unlike in Brookfield, while it would be time-consuming to go back if confused

by a billboard, in the online world all the user needs to do is click the Back button. Thus the use of trade names as keyword triggers was allowed. Outside the U.S, Google claims that if an owner objects to a third party using its trade name as a keyword trigger, it will require the advertiser to remove the term. (This may in part be motivated by several high profile European cases -- Louis Vuitton v. Google, Le Meridien v. Google and Accor v. Overture -- which have all ruled that search networks are guilty of trademark infringement when they allow advertisers to bid on trademarked terms). However, while it will prevent bidding on just that trade name, it refuses keyword phrases composed of combinations of trade names and generic terms (such as "Hyatt Vacations" containing the generic term "vacations" in addition to the trade name "Hyatt"). Google is protected in such behavior under arguments of comparative advertising and fair use (see for example, Playboy Enterprises Inc. v. Netscape Communications Corp).

A Call to Action

Using trade names in paid search advertising is clearly controversial. While legally (in the U.S. at least) the search networks are justified in allowing advertisers to bid on trade names, practically all will help owners to protect their online brand by prohibiting trade names in the subsequent advertisement's headings or copy. However hotel companies are failing to take advantage of this provision. My survey results show that in most cases the benefit of having favorable positions in organic listings is being diluted by third party sites abusing trade names in advertising copy. Over 90 percent of the time, at least one of the sponsored links made use of the hotel's trade name. Search network's claim that they are not aware of which terms are trade names and that when informed on a case by case basis they will prevent the advertiser from subsequently using the term in question -- something that is clearly not being done by hotel companies. This demonstrates a severe lack of either knowledge or attention, as minimal effort could result in less business being diverted and much higher traffic.

Controlling the use of trade names as keyword triggers is more difficult. While anecdotal evidence suggests that search engines respond well to informal complaints about bidding on trade name terms, in most cases owners have to pursue the advertiser directly. Where the contact details of the offending site can be established, a simple cease and desist letter can be highly effective. If unsuccessful, legal action may be necessary and thus evidence of infringement (in the form of screen captures) needs to be collected, as by the time the case gets to court, the adverts in question will have disappeared. Monitoring and protecting a company's online brand is time consuming but essential. Audits need to be conducted frequently, examining both paid and organic search results for evidence of people trying to profit from trade names. Procedures under which both the search network in question and the advertiser are contacted to request discontinuation need to be established. Not doing is already undoubtedly resulting in lost business. Traffic from branded search terms has the highest conversion ratio, so brand hijacking of this type has a real and extremely negative impact on the bottom line.


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March 19 ­ 20, 2007

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1. Using a sample of hotels in Europe, Asia and the USA, 540 searches were performed using individual hotel names as criteria. Where the latter did not contain the city name or the word "hotel," they were added for the sake of consistency. Sites serviced by both Google AdWords and Yahoo! Search Marketing were assessed, with regional variations of each site (.com, .fr and respectively) used to establish if differing regulations affect results.

Produced by:


Hospitality Financial and Technology Professionals

Watch for session descriptions and online registration in January 2007! Available at

The Bottomline 21

Online Marketing





By Mike Heilbronner, Esq. and Sue Heilbronner

ith purchases of online travel continuing to scale at a feverish pace, the Internet is quickly becoming the most significant distribution channel for hotel revenue growth. It is predicted that at least 50 percent of all hotel bookings will be made online by 2009, and, therefore, the Internet affords hospitality professionals an immense opportunity to leverage increased brand awareness and highly profitable revenue contribution. In contrast to the upside offered by the online channel, the dynamic growth of the online environment also creates a range of new risks and opportunities for strong competition in hospitality. When this competition crosses the line of legal propriety, hotel professionals should identify and address the transgressions in order to protect their assets, revenues, and brands. Illegal or improper online activities by others can cost hotels revenue, profit margin, brand value, and goodwill. Hoteliers themselves also should avoid running afoul of the formal laws and informal "rules" of online marketing. Missteps can be costly. Daily decisions about the online space -- what photos to post on a hotel web site, what to name a new package or promotion, whether to bid on a competitor's brand as a paid search keyword and

how to write the title of a new e-mail blast -- should be made by business people who are mindful of the areas where trademark, privacy, contract and other branches of law might come into play. Proactive awareness can often avert matters that ultimately might fall into the hands of lawyers. Hospitality professionals can protect their brands online more effectively and avert legal snares by adhering to the following guidelines of online marketing (summarized from "Profits and Pitfalls of Online Marketing: A Legal Desk Reference for Travel Executives," a recent special report published by TIG Global in partnership with online risk-management expert, Cyveillance, and the Hospitality Sales and Marketing Association International Foundation (HSMAI)).

that are important to their marketing plans (e.g., the name of a new spa treatment, a unique hotel package, or the name of a kids-camp program at a group of hotels). Once a company is ready to use a new trademark, and after the trademark has been cleared, the company should file an application to register the trademark with the U.S. Patent and Trademark Office.

Continually Register your Copyrights


Clear your Trademarks


Before creating and publicizing a new name for a resort, hotel or program, hire counsel to "clear" the name and evaluate the potential risk of infringing an existing trademark. Several vendors offer comprehensive search services, and intellectual property attorneys regularly evaluate such searches and provide opinions about the risks associated with using new trademarks. Companies should seek to register new trademarks

Copyrights protect original works of authorship fixed in a tangible medium (e.g., a work saved on a computer hard drive, written down, photographed or recorded). Make sure to register copyrights for all commercially significant marketing materials. Such materials often include the creative elements that comprise the overall "look and feel" of your web site, individual graphic components, photographs, film clips, etc. Continually re-register your materials when important new web site content is added and when material design changes occur. Copyright registration is not mandatory, but it enables you to protect your creative material when someone infringes on it. Registration also offers valuable potential remedies in litigation. (See the "What is Subject to Copyright Protection" chart on page 24.)

Sue Heilbronner is executive vice president of marketing and business development for TIG Global. Mike Heilbronner is an intellectual property attorney and founder of IdeaLegal, P.C. 22 December 2006/January 2007

Solidify your Rights to your Intellectual Property


Companies should take steps to secure ownership rights or licenses for all content that is entitled to copyright protection, including content on their web sites. The financial and other risks associated with copyright infringement are substantial. Hospitality professionals need to ensure that all vendors, photographers and web designers who create copyrighted material on their behalf sign over the rights to that material in a clear, written assignment agreement. Hoteliers also need to be sure that all vendors have cleared the rights to any photos or other intellectual property used on your hotel web sites and in other marketing materials since, as an involved party, you share potential liability. Lastly, if you or your vendors take original photographs of recognizable people for commercial purposes, model release agreements need to be signed in order to protect your ongoing rights to the images.

The Basics of a Privacy Policy

Based on current best practices, the range of controlling current laws and necessary caution, privacy policies should include (at a minimum): · Simple language that a novice Internet user can understand. · Language related to the Children's Online Privacy Protection Act (COPPA), which requires the consent of an adult parent or guardian for the collection of any information related to a child less than 13 years of age. · Disclosures about whether, how, and why third-party vendors may have access to an individual's data. · A link to the FTC, TRUSTe and/or Better Business Bureau, providing consumers with a way to get more information about online privacy. · Disclosure of a valid means by which consumers can unsubscribe from e-mail distribution lists. · A link to contact information and/or an e-mail form for a customer service department that receives and addresses inquiries about online privacy. · Discussion of how the site treats data that may be transferred to, stored, or used in the United States or other countries. · A disclaimer that the privacy policy posted on a given hotel web site is not necessarily enforced on sites to which the hotel site links. use of personal information. Every hotel should have a link to their privacy policy on their web site -- on the home page and on any pages in which an individual has the opportunity to provide personal information. For hoteliers, such pages typically include the home page, reservation pages, web site registration pages and RFP submission forms. Implementing and adhering to the privacy policy are equally important. Make sure to designate and empower one or more employees to ensure a privacy policy is implemented and to follow changes in this dynamic, increasingly important area of law. page with chunks of keyword-heavy text to increase your rankings on the search engines and then redirecting consumers to an actual informative and engaging home page is called "cloaking" and can result in a sight being delisted by the search engines. Create web pages for users and continually optimize your site in accordance with search engine guidelines, which can be found on the various search engines' corporate web sites.

Proactively Register Related Domain Names


To avoid cybersquatting and related problems, hoteliers should be extremely aggressive in registering a variety of domain names related to their own domains and future business ventures. The expense associated with registering additional domains (as low as $8 per year, per registration) pales in comparison to the expense and resource drain associated with securing the transfer of a valuable domain from a squatter. Hoteliers should register the following types of marks for most top-level domains (.com, .org, .net): · Common misspellings of trademarks · Trademarks plus other descriptive phrases (e.g., brand + "hotel") · Trademarks plus common negative phrases (e.g., brand + "sucks") · Planned or possible future sub-brands in development at the hotel company (e.g., brand + "express" or brand + "kids camp")

Monitor the use of your Brand Name by Advertisers on the Search Engines

Adhere to Proper Search Engine Optimization Practices



Publish a Thorough Privacy Policy


Hoteliers must develop and implement legally compliant privacy policies related to the collection and

Avoid being penalized and delisted by the search engines for improper search engine spam techniques. Do not hide keyword-dense text on your web site or repeat certain phrases within "hidden" source codes for only the search engines to read. These practices are called "keyword stuffing" and, when detected, a web site can be quarantined by the search engines. Additionally, do not deliver one version of a web page to a user and a different version to a search engine for indexing purposes. Creating a home

Monitor who is bidding on or using your trademarks in pay-per-click (PPC) advertising. Competitors and third party intermediaries could be bidding on your hotel name and stealing part of your market share. Consistently monitor the search engines for these types of PPC advertising and determine if it infringes your trademark. Large, national franchisors/brands should also be mindful of how their franchisees are bidding on the brand trademark. Franchisee hotels should be educated on the franchisor/brand's PPC bidding practices in their region to ensure efforts are not duplicated and that PPC expenses are not unnecessarily inflated by dual bidding

The Bottomline 2

What is Subject to Copyright Protection? yES!

Copyright can apply to most forms of creative expression, including literary, dramatic, musical and other artistic works. For web sites, copyright law can apply to: · Text · The creative elements that comprise the overall "look and feel" of the site · Individual graphic components · Photographs · Film clips · Music, etc.


Copyright protection is not available for:

· Titles · Names · Short phrases · Ideas · Facts · Functional or utilitarian systems and processes

property. Negative reviews can cost hotels thousands of dollars in lost bookings and decrease a property's "star" rating on sites like Negative statements about a hotel should be identified immediately and evaluated to determine if they are true, false or possibly fake. Accurate, but negative reviews should be treated as a free focus group and used to fuel improvements at the property. False, negative reviews require recourse by pursuing the appeal or response process of the specific site. Most travel review sites have established processes for handling negative reviews. Some sites allow hotels to submit "management responses" that are posted alongside negative reviews and others allow you to appeal a negative review and request its removal from a site.

Search Engine Trademark Bidding Policies Search Engine

Google Yahoo! MSN

Comply to CAN SPAM Laws When Conducting E-mail Marketing

Allows TM Bidding by Competitor

Yes No No Yes

Allows TM in Ad by Competitor

No Depends No Depends

Allows TM Bidding by Reseller

Yes No Yes Yes

Allows TM in Ad by Reseller

Yes Depends No Depends


on the same keywords. Currently, there is no specific law directly preventing or even discussing PPC bidding on the trademarks of others, but there are many cases currently in the courts grappling with this issue under broader trademark laws. When facing an infringement problem, seek legal advice on whether recourse is available for improper behavior by advertisers or the search engines.

Bid With Caution on Other's Trademarks



The relatively unsettled legal landscape of using others' trademarks in PPC advertising has sparked a range of non-legal responses in the form of policies and contractual requirements by the major search engines, the hotel brands, and industry trade groups. Most of the major search engines have published guidelines on their corporate web

December 2006/January 2007

sites to communicate their stance on the various forms of trademark bidding. The search engines' guidelines differ greatly, but all of them provide for some form of penalty for noncompliance. Self-imposed restrictions from the search engines fall into two general categories: first, rules about whether a third party's trademarks can be the subject of bids; and second, restrictions on the use of a third party's trademarks in the heading or text of an ad that appears in the PPC results. (See "Search Engine Trademark Bidding Policies" chart above.)

Watch Online Travel Blogs and Review Sites


Hotels generally lack control over the information that is shared about them online by the public. Stay aware of the "buzz" that travel blogs and review sites are posting related to your

E-mail marketing is an extremely valuable tool for hoteliers to communicate with potential guests and generate business through e-newsletters, e-mail promotions and loyalty programs. Due to a variety of illicit tactics and abuses involving personal e-mail addresses -- most notably "spam"-- laws have been created to govern the dissemination and content of e-mail marketing messages. The Can Spam Act of 2003 applies to all marketing and promotional e-mail distribution except for transactional e-mails (e.g., reservation confirmation e-mail or thank-you correspondence). Can Spam requires that the following elements be included in all commercial e-mail covered by the act: · Accurate sender information, including accurate domains in identifying the sender(s). For example, a hotel can use [email protected] or [email protected] as models of appropriate sender addresses. · A subject line that clearly and conspicuously identifies the e-mail as a commercial solicitation or advertisement. Potentially acceptable phrases in subject lines include "Special Offer" or "New Promotion." · The subject line must be clear as not to deceive recipients. The content of the e-mail must also be consistent with the subject line.

The CAN SPAM Act of 2003 -- Legal vs. Illegal E-mail Legal E-mail Marketing

From: To: Subject:

[email protected] [email protected] ADV: 25% Off Summer Vacations in Australia 1. The "From" line accurately and clearly reflects the sender or initiator of the e-mail. 2. The "Subject" line makes it clear that the e-mail is a commercial advertisement.



3. Message content is consistent with the text in the "Subject" line. 4. Message includes the sender's valid postal address as a means for the recipient to contact the sender.

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If you received this message in error or do not wish to receive any more e-mail from us, please send a reply message with "REMOVE" in the subject line to: [email protected]


5. Message includes a working return e-mail address as a way for the consumer to decline to receive further commercial e-mail from the sender. A working link or other electronic way for consumers to request removal is also acceptable.


Illegal Spam

From: To: Subject:

[email protected];lkj; [email protected] Urgent reply needed


1. The "From" line is ambiguous, does not clearly identify the sender and is most likely not a valid return e-mail address. 2. The "Subject" line is misleading and does not make it clear that the e-mail is a commercial advertisement. 3. Message text is not consistent with the "Subject" line of the message. 4. Message does not provide a valid postal address as a way for the recipient to contact the sender. 5. Message does not provide any way for the recipient to decline to receive further commercial e-mail from the sender.


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· The content of the e-mail must contain an obvious and functional method for recipients to opt out of future communications. A working unsubscribe link or return e-mail address likely is satisfactory. · The e-mail must contain a valid physical address that will enable consum-

ers to make offline contact with the sender. (See the "Can Spam Act of 2003" chart for more details). More detailed information is available in the special report, "Profits and Pitfalls of Online Marketing." More information is available at

The Bottomline 2



By Lou Cook

2006 Paragon Award Winner


Richard Braa

" When I learn something good, I have to share it. I love to add value to everyone around me."

The problem with decision making in companies nowadays is that decisions get made over and over, and not carried out. We need democratic decision making and dictatorial execution." The above classifies as a Rickism, a pithy pearl of wisdom from HFTP's 2006 Paragon Award winner Richard "Rick" Braa. One of his clients, Mary Harrigan coined the term Rickism to define the concise words of wisdom he sent her "... reminding me of the power of my role and the necessity to lead. Most of what I have received from Rick can never be found on a bill, itemized time or service with a price attached." Harrigan hired Braa and his firm Clothier & Head when she had just two restaurant in a Los Angeles suburb. Today she heads Stonefire Grill, Inc. with five locations and sales reaching $20 million. She says, "I credit Rick, his talent, his enthusiasm, his commitment and his selfless character for making this happen." The wisdom Braa brings as a consultant comes from 30 years of restaurant experience. You name it; he's done it. He was born in Monroe, a small town in Washington and is the fourth of four children. "There were five years between me and my closest sibling," he says, "and my parents' favorite hobby was dining in restaurants. They started taking me along, so I got turned on early to good food and service. My brother reminded me that the three of them were raised on liver, and I was raised on lobster." At age 13 Braa started working in the industry as a dishwasher, potato peeler and applesauce maker. His dad bugged a manager to teach him how to cook, and Braa moved through the roles of fry cook, prep cook and line cook to front of the house. He worked every position, learning as he went, moving to larger restaurants,

working part time through high school and college. He attended Seattle University, a small private Jesuit college, on the nineyear plan. "I was young and stupid and would quit for a while, and then return to school." By the time he received his bachelors in business administration in 1989, Braa had accumulated 255 credits, 75 more than required, but he had a tremendous education. After graduation, he joined Restaurants Unlimited as an accountant for the Seattle-based company. Restaurants Unlimited is a national restaurant chain of 30 plus restaurants including brands such as Palomino, Cutters and Kincaid's. The company also developed Cinnabon, whose enticing scents waft over shopping centers and airports. Braa rewrote financial systems and tools for the restaurants, and designed internal control systems that included functions such as internal auditing procedures, cash flow-analysis models and financial reporting methodologies. He rose to become director of financial planning and analysis and spent 11 years with the company before moving on in 2000 to WestFarm Foods. WestFarm was a $1.3 billion global enterprise, and as director of finance, Braa held the top position for the $600 million consumer products division. During his two years with WestFarm, his role was instrumental in driving expansion for brands such as Darigold, Nestlé and Silk Soymilk. This meant reorganizing and restructuring departments in order to increase efficiency, reduce cost and drive sales. He improved financial results by building cross-functional teams to work internally with logistics, operations, finance, marketing and I.T. personnel. Positive results for the company, but for Braa this was the first time since age 13 when he wasn't working directly in the


December 2006/January 2007

food industry. "Normally," he says, "you never get an opportunity to work with people who arrive tired and hungry, and are restored by a good meal and a pleasant restaurant experience." He missed this job satisfaction and would return to the food service fold via a softball game. During his tenure at Restaurants Unlimited, Braa had started a softball picnic, and each year he went back to ready the equipment and be the umpire. In 2002, Carol Miller, in-house counsel for Restaurants Unlimited, suggested that Braa talk to Gerry Adams of Clothier & Head, a leading CPA firm in the Puget Sound region. Braa's first response was "No!" He didn't want to go into public accounting, but Miller kept after him, and Adams says, "Carol's recommendation proved to be a blessing for our firm." Clothier & Head wanted a financial person, who could lead their hospitality niche, someone who could analyze a restaurant, do strategic planning and add value for their clients. Braa joined the firm in 2002 and is now a principal and director of hospitality industry services. He and his team advise hospitality firms -- clubs, hotels and restaurants -- on auditing, budgeting, forecasting analysis, operations and information systems. Various clients might have up to 160 units, hundreds of restaurants, or multi hotels and resorts. One of Braa's passions is growing restaurants as he did with Mary Harrigan's Stonefire Grill. "The sweet spot," Braa says, "is helping a company organize, expand and build up from a one- or tworestaurant company, taking companies that are small and making them big." But his main goal is to bring a company the most success wherever they are. Braa describes his partner Gerry Adams as a master architect, and himself as the plumber. "He has the vision; I help them get there."

Braa is a member and current president of the HFTP Greater Puget Sound Chapter. Since he joined in 2003, the chapter has grown to 84 members. After his first meeting, he approached then Chapter President Lisa Funk, CPA, CHAE, and offered to be the speaker at an upcoming chapter meeting. His first presentation was "Enduring Leadership," a leadership class built around the 1914 expedition led by Sir Ernest Shackleton, who attempted to cross the Antarctic continent. Although the expedition failed, it remains an incredible story of survival and immortalized Shackleton's name and that of his ship, the Endurance. After showing a video of the Antarctic climate to illustrate what Shackleton was up against, Braa asks his listeners to imagine being caught there for two years. He says, "When I learn something good, I have to share it. I love to add value to everyone around me." In her role as corporate controller for The Hotel Group, Lisa Funk writes, "He [Braa] can take a room full of servers and get them excited about how they can contribute to the financial success of their company. He can also take a room full of HFTP members and give them the desire to grow a chapter, which has happened with the Greater Puget Sound Chapter." It may look easy to his audience but for Braa speaking is hard work and he sweats over every word. "I am an introvert and practice a lot before I speak. The message must be clear so others can buy it. I want to help them think about decisions they can make to improve their lives, to give them a new tool to use or not." His speaking schedule covers a variety of industry-based subjects in a range of locations. In addition to his HFTP speaking engagements and local chapter involvement, Braa serves on the HFTP

International Education Advisory Council and has been a keynote speaker for the Club & Hotel Controllers Conferences. In 2004 ­ 2005, the Washington Restaurant Association recognized him as "Supplier of the Year" for his significant contributions of time and talent. He was the first financial services provider to receive this honor and is currently lending his expertise on WRA finance committee. Braa takes pride in his daughter Ashley, a 20-year-old junior at the University of Washington. He loves to golf, but describes this passion as "a hog of a hobby." Reading is another pastime. However, since his book choices focus on leadership and helping people succeed in their lives, it's almost an extension of other parts of his life. Clothier & Head has a strong commitment to their local community, and the firm does more than just talk. Company members work at a local food service organization that trains the less fortunate to enter the workforce in hospitality companies. Twice a year Clothier & Head closes its office, and the staff of 50 to 60 goes into the community for service work. They have done projects with Boys and Girls Clubs, cleaned drains in streams and helped put together "Tree House" where kids from low income families can get new school clothes and shoes free-of-charge. Braa says, "For a CPA firm to close its office twice a year is a huge financial commitment. There is no revenue coming in those days, but by taking a greater interest in our community we can provide greater insight into their businesses." Rick Braa says the highest calling is to serve, not to be served, a good thought and a bit of what's in a name. Rick's last name is Norwegian and, coincidentally, in that language "Braa" means "good."

The Bottomline



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