Checking in for work AFTER SINKING TO THE DEPTHS OF DEPRESSION IN THE EARLY 90s, the hotel sector has bounced back with a vengeance.

LUCY HICKMAN TALKS TO LAWYERS ABOUT HOW THIS has AFFECTed THEMThere is an awful lot of movement in the hotel industry at present, although apparently no universal trend.

Granada Compass, for example, is poised to...There is an awful lot of movement in the hotel industry at present, although apparently no universal trend.

Granada Compass, for example, is poised to dispose of its Forte Hotels portfolio, valued at around 3 billion, to focus on its other business interests.

Whitbread and Bass, on the other hand, are both seeking to sell off their pub interests to concentrate more on their hotel arms.

Granada acquired a number of hotels following its hostile takeover of the Forte Group in 1996.

Lovells advised Granada then and on its recent merger and subsequent demerger with Compass led by partner Frances Le Grys which involved Granadas hotel interests transferring to Granada Compass.

It is these hotels which are currently up for sale.

Some commentators say Nomura International, whose main law firm is Clifford Chance, is the favourite to land the bulk of the Granada Compass chain, but Andrew Little, head of the hospitality and leisure group at Garretts, Arthur Andersens associated law firm, says: This is a big deal and there is due diligence being conducted by some very large corporates at the moment, all looking to get a piece of the action.

All this leads to a lot of work for law firms notably Freshfields, Granada Compass main law firm, although other firms are set to benefit.

There are a lot of law firms sniffing round, says McDermott Will & Emery corporate lawyer Catherine Moss, who last month advised the management of Group Principal Hotels, on the companys 225 million acquisition by Nomura Internationals principal finance group.

Principal Hotels is another group which has reorganised its portfolio of late, after pulling a proposed 110 million flotation in 1996.

It has since sold its three-star hotels and bought the Hotel Russell, its first London hotel.Ms Le Grys, who also acted for Wyndham in last years sale of the Mal Maison chain to Marylebone Warwick Balfour, says: The market is fairly buoyant at the moment but the only trend in the sector that one can identify is that there is no trend.

Some are disposing of their hotel interests, while others are building them up.

People will be watching the outcome of this Granada Compass deal very closely because it will give a good indication of the state of the market.She says it is unlikely that Granada Compass will sell all its Forte portfolio to one buyer, or if it does, it will probably be at a lower price than it could make by selling off the hotels individually.

When we were involved in trying to sell off 16 hotels, we didnt get a single bid for all of them.

It depends on pricing.

Granada may get a good price for some of them, but they may accept a lower offer if they get one for all of them because they dont want to be left with a few hotels that are dross.

SJ Berwin partner David Ryland, who leads the firms hotel work, agrees that the sector is looking fairly healthy at present, with a lot of financing and corporate sales under way, and hotel portfolios going on the market.

It has slowed down compared with around four years ago, he says, when hotel asset sales were at their peak.Its a very cyclical market.

Values went up significantly between 1993 and 1997 and are very good still.

However, in the early 1990s, the hotel industry suffered the double whammy of rock-bottom property prices brought on by the recession, and, in the UK particularly, a slump in visitors due largely to the Gulf War.Mr Ryland, whose client lists includes Marylebone Warwick Balfour, Ladbrokes and the Hilton Group, says: There was a big reduction in prices in the early nineties, and many hotels were actually sold off at an undervalue.

Anyone who bought into the market around 1993 will be doing extremely well now.

He says the long-term prognosis for the hotel sector is very good, according to recent market analysis: The report says the next five to ten years should be good in this sector.

In fact, it showed that the hotel sector is currently out-performing all others in the retail sector.Most agree that the main hot-spots for hotel-related legal work at present are Europe and the UK.

Mr Little says: In the US there has been a strong move towards branded partners, with a lot of hotels owned and operated by large corporates.

Europe always used to have more individual mama and papa-run hotels, but were increasingly seeing more consolidation of the hotel market there.He says the UK is far ahead of the game in this area, with chain hotels such as the Travel Inn opening a new hotel in this country about every ten days.Richard Gerstein, head of Finers Stephens Innocents hotels group, whose clients include Radisson SAS, Marylebone Warwick Balfour and Conran Group, says: Both the UK and the European markets are very buoyant at the moment.

Theres a clear move upwards in both markets, particularly in city centres.

Its a reflection of the world economy, and amount of business travel taking place.

There is more disposable income for both holidays and business.Although some lawyers concentrate only on specific legal aspects such as mergers & acquisitions (M&A) for a hotel client, others, like Mr Ryland have a wide spread of work.

Clients come to me and say they want me to be involved.

Im a property finance lawyer but my team and I also get involved in such things as real estate, financing, business aspects, management contracts and licenses.

A number of our clients will use us to do everything, while in other transactions, we will work with in-house lawyers.Having a hotel chain as a client can throw up a huge variety of work, agree the lawyers, particularly since there are different ways in which hotels operate, the main ones being: owner-operated, through franchises, and management-operated.

Apart from straight M&A deals, there are issues related to construction, licensing, franchising, as well as remuneration restructuring after a takeover or merger.There are also property aspects which, McDermotts Ms Moss says, can get complicated, as well as intellectual property considerations.

And since many hotel owners prefer to bring in outside operators to manage their hotels, the drafting of management contracts is also a good source of revenuefor law firms, according to Ms Le Grys.Ms Moss says that among other commercial issues which need to be dealt with, fire certificates often pose a problem.

She says: You wouldnt believe how often you go through due diligence to find that a hotel doesnt have one in place.

Opinions are split as to whether the sector will see many newcomers arriving on the scene.

Most agree that the market is fairly mature, and one that is pretty much dominated by established names.

Mr Gerstein says there are unlikely to be many new faces breaking into the market, while Ms Le Grys contradicts, saying the market is one that is capable of attracting new entries.

She says: I dont see it as being a market which people without much experience cant get into.

For example, Wyndhams Historic Hotels a chain of country house type hotels was acquired in December 1999 by a company, which was a relative newcomer to the hotel market.

Mr Gerstein, on the other hand, says: I dont think there are going to be many new people breaking in.

Its a tough market, you have to invest a lot of money, buying in the expertise in a big way.

The hotel industry is set to meet to put its world to rights in Berlin this week at the annual international hotel investment conference.

Given the opportunities for the UKs specialist lawyers to network and pick up new clients, doubtless they will have booked their hotel rooms in the German capital well in advance.

Lucy Hickman is a freelance journalist