In this issue
- Texas Law (SB17) Restricts Foreign Ownership of Real Estate — Legislation Applies to Hotels and Other Asset Classes
- With NYC Hotel CBA Expiring, Employers Should Prepare for a Tough Bargain
- Rooms, Revenues, and Regulations: Liquor Licensing Fundamentals for Hotel and Resort Projects
- The Impact of Tariffs on the Hospitality Sector
Texas Law (SB17) Restricts Foreign Ownership of Real Estate — Legislation Applies to Hotels and Other Asset Classes
KEY TAKE
This recently adopted legislation, as in the case of similar laws of several other states, is being challenged in the courts on its constitutionality as well as its preemption by federal laws.
Effective September 1, 2025, Texas Senate Bill 17 was signed into law by Texas Governor Greg Abbott as Texas Property Code Subchapter H (the Act),[i] which broadly restricts the acquisition and/or purchase of residential and commercial real estate in Texas by individuals, companies, and governmental entities from any country designated by the “United States Director of National Intelligence as a country that poses a risk to the national security of the United States...”[ii] or from China, Russia, Iran or North Korea, as designated by the governor of Texas under Section 5.354 of the Act.[iii] Notably, the Act adds Texas among a growing list of states seeking to enact similar laws — Florida’s Senate Bill 264 was enacted in May 2023, and similar bills have emerged in Louisiana, Arkansas, Alabama, and Utah, all of which are intended to restrict foreign real estate investment based upon national security concerns. We previously covered Florida’s SB 264 in Leisure Law Insider Vol. 3.
Overview of the Statute
The Act applies broadly to commercial real estate asset classes (specifically including agricultural land, commercial property, industrial property, groundwater, residential property, mines, quarries, minerals, timber, and water rights),[iv] with limited exceptions covering individuals who are U.S. citizens (including entities owned or controlled by them), legal permanent residents of the United States (including entities owned or controlled by them), and individuals domiciled in and who are citizens of a country that is not banned under the Act, as well as a homestead exemption for the primary residence of individuals who are lawfully present in the United States. Specifically, Sec. 5.253 of the Act prohibits the designated parties from purchasing or acquiring “an interest in”[v] such types of properties in Texas.
Of specific interest to our readers, the Act is applicable to hotels and retail properties, as well as commercial properties that may be developed for such purposes.
Pursuant to the Act, the Texas attorney general is given the authority to undertake investigations and prosecute enforcement actions by commencing in rem actions against properties that were acquired in violation of the Act, as well as obtaining the appointment of a receiver to oversee the property and effectuate its divestment.[vi] In addition, the Act authorizes the attorney general to establish procedures to examine purchase and sale transactions and whether there is a basis to investigate whether transactions may be in violation of the Act.[vii] Violations of the Act may result in civil penalties of the greater of either $250,000 or 50% of the market value of the property in question, and companies and/or individuals that knowingly or intentionally violate the Act may be subject to state felony charges.[viii]
In light of the drastic legal consequences for violating the Act, stakeholders seeking to acquire, develop, and/or otherwise invest in commercial real estate in Texas are cautioned to perform due diligence on their direct and indirect partners to ensure the transactions are not prohibited under the Act. They should also stay abreast of the countries designated by the U.S. Director of National Intelligence to be a threat to the security of the United States.
Legal Challenges to the Act
As one may expect, there have been legal challenges to the Act and Florida’s SB 264, which interested parties are advised to follow, and additional legal challenges may continue to arise under both federal law and state laws. For example, the Chinese American Legal Defense Alliance has filed a lawsuit[ix] alleging that the Act deprives Chinese citizens (who are in the U.S. on visas) of due process and equal protection of the laws under the 14th Amendment. Moreover, we anticipate legal challenges to the Act as being preempted by federal laws, such as the Foreign Investment Risk Review Modernization Act (FIRRMA)[x] and the Committee on Foreign Investment in the United States (CFIUS), which oversees and restricts foreign investment in real estate in the United States based upon national security concerns.[xi] There are also legal challenges that the Act violates the Fair Housing Act (42 U.S.C. Section 3601 et seq.) as it is alleged to be a discriminatory housing practice.
It is advisable to consult with counsel as part of a due diligence review and to keep abreast of the changing legal landscape in light of the status of the pending cases — as well as cases that may yet be filed — and the examination procedures established by the attorney general. Understanding the evolving nature of the Act will help stakeholders avoid the severe consequences for any violations. We will continue to monitor these matters.
[i] Tex. Prop. Code Ann. §§ 4.251-5.259.
[ii] Tex. Prop. Code Ann. § 5.253(2).
[iii] The Bill authorizes the governor of Texas, after consultation with the public safety director of the Department of Public Safety and the Homeland Security Council, to determine whether a real property transaction poses a public safety or national security risk and to designate or remove a designation of a country or entity under Sec. 5.253. (Tex. Prop. Code Ann. § 5.254(a)).
[iv] Tex. Prop. Code Ann. § 5.251.
[v] The phrase “an interest in real property . . .” is used in the Act but not defined. A broad reading of the Act would interpret the phrase to apply not only to direct ownership, but also to direct and/or indirect ownership interests in an entity which owns or leases such types of real property (there is an exemption for leases having a term which is less than 1 year).
[vi] Tex. Prop. Code Ann. §§ 5.255 (a)-(c).
[vii] Id.
[viii] Tex. Prop. Code Ann. §§ 5.258 (a)-(b).
[ix] Peng Wang v. Paxon, No. 25-20354, slip op. (5thCir. Dec. 11, 2025).
[x] 50 U.S.C. § 4564(d)(1).
[xi] The CFIUS regulations define covered real estate transactions and set out criteria for excepted investors (31 C.F.R. §§ 802.101, 802.215, and 802.301).
With NYC Hotel CBA Expiring, Employers Should Prepare for a Tough Bargain
KEY TAKE
The existing CBA is considered among the most union-favorable agreements in the country, with strict limits on management operations and robust job protections for over 28,000 employees.
At midnight on June 30, 2026, the collective bargaining agreement (CBA) between the Hotel Association of New York City, Inc. (Employer) and the New York Hotel and Motel Trades Council, AFL-CIO (Union) will expire. The Union estimates that 28,000 employees in the industry are covered by the CBA. The significance of this negotiation cannot be underestimated: it is the first full negotiation between the parties since the 2012 CBA was negotiated.
There is no question that the non-economic terms and conditions of the CBA, when compared to almost all other collective bargaining agreements, are among the most favorable to any union or industry nationwide. The CBA provides very extensive job security protections, as well as very significant restrictions on management’s right to operate their businesses. In 2015 the parties negotiated a Memorandum of Understanding (MOU), which is currently in effect, that primarily addressed economic issues such as wages, pensions, and health benefits. Possibly to counter union and employee advantages, the MOU provided for very small annual wage increases of between 2.36% to 2.75% increases in each of the most recent seven years of 2019-2025.
Both parties have already begun to articulate their bargaining positions and goals. Union President Rich Maroko published a letter stating that the Union “has been preparing and setting the stage for these negotiations for years.” In reactivating the Hotel Employees Action Team (HEAT) — involving the appointment of a “HEAT Captain” at each location who will be responsible for communicating the status of the negotiations to and gaining the support of Union members — Mr. Maroko stated:
“We know what we need to win in 2026, and it’s a lot. At the top of a long list are higher wages and the money we need to secure our medical and pension benefits. No one should be under the illusion that this will be easy. We need to be ready to fight...”
In response, Employer CEO Vijay Dandapani identified the “tremendous headwinds” confronting the industry, including “skyrocketing costs, the highest taxes in the country, significant decreases to international tourism.”
This seems to be shaping up as a battle between two heavyweights, and it may result in a difficult result for one or both parties to live with. A work stoppage is not beyond the realm of possibility. If the economic settlement of the new CBA were to emulate the very pro-union and pro-employee non-economic terms of the current CBA, then employers may be caught between the proverbial rock (the Union) and the hard place (the marketplace). Employers would be advised to closely monitor these negotiations and to be prepared, just in case there may be any work stoppage or work interruption. We will update our readers on the status of negotiations.
Rooms, Revenues, and Regulations: Liquor Licensing Fundamentals for Hotel and Resort Projects
KEY TAKE
Early engagement with specialized beverage counsel allows developers to align license strategy with the business plan, avoid disqualifying design choices, and preserve optionality for future operators and revenue streams.
When developing a hotel or resort, securing the right to serve alcoholic beverages is often a key driver of guest satisfaction and overall profitability. However, the process of obtaining a liquor license is complex and highly regulated, with requirements that vary significantly by state and even by municipality. For developers and investors, understanding the nuances of liquor licensing early in the project lifecycle is essential—not only to ensure compliance but also to maximize the value and operational flexibility of the property. This article explores the critical liquor licensing considerations that should be factored into the planning and development of hotels and resorts, including the types of licenses available, corporate structuring, development-specific requirements, and working with third-party food and beverage operators.
Types of Liquor Licenses
The landscape of liquor licensing in the United States is highly fragmented, with each state—and in some states, each municipality—setting its own rules and requirements. In some states, hotel and resort developers can obtain a liquor license “by right,” provided they meet certain minimum criteria such as having a minimum number of guest rooms or having an accessory restaurant with a minimum number of seats. Alternatively, states may cap the number of available licenses based on location and population quotas, requiring new applicants to purchase a license on the open market, often at a significant premium.
For example, in Florida a hotel owner may apply for a series 4COP-S special hotel liquor license, which allows the sale and service of beer, wine, and liquor for consumption on- or off-premises throughout the hotel property and mini bars within the guest rooms. This type of license is issued by the state to applicants “by right,” however, only if the hotel qualifies by consisting of a minimum number of guest rooms based on the population of the county where it is located. In most counties, the minimum is 100 rooms, with some as low as 50 rooms. For smaller properties located in historically designated structures, Florida also offers a series 4COP-SH special historic hotel license, which is tailored for certain hotels with at least one guest room (that’s right, just one!). However, to qualify for this type of license, the property must derive at least 51% of its gross revenue from the rental of guest rooms. Additionally, for developments that will not have enough rooms to qualify for a series 4COP-S license and are not located in a historic structure to qualify for a series 4COP-SH license, there are still other types of liquor licenses that a hotel may qualify for in Florida. If the hotel will have a restaurant with at least 120 seats and 2,000 square feet of service area that derives at least 51% of its gross food and beverage revenues from the sale of food and non-alcohol drinks, it could qualify for a series 4COP-SFS alcoholic beverage license that could cover the entire hotel property; or if the development doesn’t qualify for any other special license, there is a series 4COP-Quota license, which has no special requirements or operational restrictions, but must be won in a state-sanctioned lottery that only occurs once each year subject to increases in population by county, or purchased from a third-party, with this type of license selling for prices ranging from $150,000 to $1,500,000 depending on the location.
Given all the unique restrictions and criteria, obtaining a liquor license should never be an afterthought in hotel or resort development. Early planning and consultation with specialized counsel can be crucial to ensuring the project is developed in a matter that will suffice to meet the needs of the hotel operation.
Corporate Structuring: Who Should Hold the Liquor License?
The legal structure of an applicant seeking a liquor license is a critical consideration for any hotel owner or resort developer. Proper corporate structuring not only streamlines the licensing process but also helps minimize required disclosures and potential liability to protect the interests of owners and investors. It can also be used to separate the interests of silent investors that may otherwise disqualify an applicant from obtaining and holding a liquor license.
When determining the corporate structure it is important to note that with the exception of some states, such as California and Texas, which allow a third-party management company to hold a liquor license in lieu of the hotel owner, a liquor license generally must be held by the entity that will: (1) own and operate the hotel; and (2) hold dominion and control over the hotel premises being licensed, typically through a deed or lease for the licensed premises. As such, a common practice in corporate structuring of projects that will hold a liquor license is to utilize a single purpose operating entity that is wholly owned by a holding company. Such a layered structure provides for the ability to insulate the broader ownership group from direct liability and, in some states, even disclosure of the individuals in the ownership group. This separation is especially important in the hospitality industry, where the risk of liability is heightened by the sale of alcohol, leading to potential for employee misconduct, such as serving alcohol to minors or visibly drunk patrons that can result in incidents with significant damages claims due to dram shop liability, such as drunk driving accidents. If such incidents occur, having a distinct operational entity as the license holder can help shield owners, investors, and other affiliated entities from direct exposure.
Liquor licensing also requires a degree of personal disclosures for owners and officers of applicants, which vary by state. Most states at a minimum will require the officers and directors of an applicant entity to be personally disclosed and fingerprinted for background checks as part of the application and qualification process. These requirements are designed to ensure accountability, to protect the public interests, and to prevent violations of “tied house evil” laws, which prohibit ownership or control across the three tiers of the alcoholic beverage industry, specifically manufacturers/importers, wholesalers/distributors, and retailer vendors. With a little advance planning, a structure can be formulated to ensure only the responsible qualified individuals will need to be personally disclosed in a liquor license application.
Development of the Premises: Land Use, Zoning, and Design Factors
A substantial portion of a hotel or resort development’s liquor licensing process is driven by land use and zoning considerations, making the location and physical development of the premises just as, if not more important than, the corporate planning and confirming ownership and officer qualifications. Without the land use and zoning approvals, a developer will not be able to secure the required business operating licenses and permits.
Every municipality sets its own land use and zoning regulations, which can dictate criteria such as permitted locations, size and design features, and hours of operation—all of which can differ significantly from one location to the next. For example, many jurisdictions across the country have specific criteria for liquor licensing that include thresholds on number of guest rooms in a hotel, square footage and/or seat counts in a restaurant or bar, and even percentage of gross revenues that are derived from the sale of liquor. Additionally, if a large resort spans across a public right of way, such as a public road, this can create a lack of contiguity that would present a potentially significant licensing challenge. In such cases, multiple liquor licenses may become necessary to cover the entire resort property. For example, if planning to utilize a special hotel liquor license and the resort property is split by a public road with all of the guest rooms located on one side of the road, a special hotel liquor license may not be able to cover the other side of the road due to a lack of contiguity of the resort premises. A second liquor license would be needed to cover this area of the resort, and the ability to obtain a second license would be dependent on the ability to qualify for a different type of liquor license, since there will be no guest rooms to qualify for a special hotel liquor license.
The design and layout of the project should also be planned with these licensing requirements in mind. For instance, the size and configuration of restaurant spaces within resort properties can be determinative of how they will need to be structured operationally to qualify for the ability to serve liquor. If a restaurant space is built in a way that it could not qualify for its own liquor license, it could effectively remove the potential option of ever being able to rent the restaurant space to a third-party tenant operator, as any operator of the restaurant would need to be an agent of the owner, i.e., operate under a management or concession type agreement, in order to use the hotel’s liquor license in the operation of the restaurant.
Developers and owners should approach project design with the goal of maximizing their licensing options, rather than limiting themselves through design choices that could restrict the types of licenses that may otherwise be available to them, ultimately leading to otherwise restricted operations and reduced potential profitability.
Utilizing Third-Party Operators and Management Services
In many hotel and resort developments, the property owner or developer will not ultimately operate the business, but rather engage a third-party management company to handle day-to-day operations, including food and beverage services. The involvement of a management company introduces additional considerations for liquor licensing, as the rules regarding who may hold the license can vary significantly from state to state.
As mentioned earlier, in some jurisdictions, a third-party management company is permitted to hold a liquor license. However, most states require that the business owner with legal dominion and control over the licensed premises (i.e. via lease or deed) must hold the liquor license and be in ultimate control of the alcoholic beverage operations of the business. When structuring hotel or restaurant management agreements, it is important to know these requirements to ensure responsibilities are properly allocated in the agreements.
It is also crucial to include provisions that protect the liquor license holder from liability. For example, if an employee serves alcohol to a minor, certain states provide statutory protections for the owner, provided specific conditions are met. In Florida, for instance, section 561.701-706, Fla. Stat., commonly known as the Florida Responsible Vendor Act, offers liquor license holders protection from administrative liability in the event an employee or agent commits a violation of the law so long as all requirements of the statute are complied with. However, not all states offer such protection; for instance, in Oklahoma, the license holder may still face fines and/or suspension of their liquor license for the actions of an employee or agent, so it is important to be aware of these factors. Since ultimate liability generally rests with the license holder, management agreements should include specific provisions to protect all parties from potential exposure. These agreements should also address operational safeguards, such as requiring the implementation of responsible vendor or other training programs for all employees who serve alcohol to maximize risk mitigation.
It is also common for a hotel or resort to have multiple third-party operators utilizing a single liquor license. For instance, this can occur when a third-party hotel operator is responsible for stocking mini-bars and a separate food and beverage operator is responsible for operating a restaurant within the hotel. This arrangement can be the most practical solution, especially when it is not feasible for each operator to enter into leases for separate portions of the hotel property and obtain their own liquor licenses due to regulatory or logistical constraints. In such cases, careful drafting of management agreements is essential to ensure that all parties understand their responsibilities to adequately protect the liquor license and themselves.
In summary, there are many liquor licensing factors that should be considered when planning the development of hotels and resorts and when engaging third-party management companies or operators to operate these businesses. Failure to consult with specialized beverage counsel to conduct licensing diligence at the onset of a hotel or resort development can result in unnecessary costs, project delays, or even limitations on operations that can be easily avoided.
The Impact of Tariffs on the Hospitality Sector
Tariffs have been the talk of the town since President Trump signed executive orders in February of this year imposing tariffs on Canada, Mexico and China. Following that there has been a dizzying series of actions, including the imposition of tariffs on a wide variety of goods and countries, as well as trade agreements secured. It has not only been difficult and time consuming to follow the frequent activity surrounding tariffs, but also impossible to anticipate future actions. Given this situation, the most important thing for hospitality investors and operators to focus on is the impact on the industry, both current and future.
Amid all of the hype and anxiety about tariffs, there are a number of mitigating factors which help to blunt their impact. Fortunately, the U.S. is a major producer of many major consumption items. For example, the U.S. sources 60% of food consumed from American farms, and domestic energy production meets 98% of our energy demand[1]. And 88% of construction inputs (e.g., lumber, steel, aluminum) are produced domestically[2]. Another factor is that, so far, a number of countries have been absorbing a lot of the tariff impact to maintain their U.S. market share. Similarly, many U.S. companies have avoided passing on the full cost of tariffs to their customers or have been delaying purchasing goods impacted by tariffs until they have used up their existing inventory and/or have better visibility into what’s to come. Finally, many companies are in the process of reshoring to the U.S. or otherwise reconfiguring their supply chains to reduce or eliminate the impact of tariffs, but the timeline for reconfiguring supply chains is long and so these efforts are not likely to positively affect projects currently in the pipeline.
Perhaps the biggest impact of the government’s tariff initiatives has been the uncertainty of what’s to come, and the fear of a significant downturn or recession, which has affected consumers and businesses alike. Even though the impact of tariffs on the CPI has been muted so far, the unemployment rate has been rising, and consumers and businesses have been cautious about spending, including on travel, either canceling or deferring bookings. This behavior has been showing up in the numbers: just recently, LARC revised its forecast of RevPar to decline .5% in 2025 and increase just 1.2% in 2026. Similarly, CoStar recently revised its RevPAR forecast down to a decline of .4% in 2025 and a decline of .3% in 2026. IHG reported a drop in U.S. RevPAR in 2025 from a 3.5% increase in the first quarter to a .9% decline in the second quarter, and a further decline of 1.6% in the third quarter, citing the impact of tariffs, among other contributing factors. The experience of other major brands has been similar.
Despite the mitigating factors mentioned above, tariffs have had an impact on construction and renovation timing and costs. Construction material costs have been increasing, shrinking developer margins, which have also been negatively impacted by higher financing costs, so many developers are putting projects on hold. Those developers with projects in process are only buying what is necessary and delaying construction until there is more certainty around tariff policy.
Most equipment and furniture are sourced outside of the U.S., and even U.S.-built products have at least some components sourced from other countries. Some owners who have already ordered or purchased equipment and furniture from other countries have warehoused the product in the country of origin until there is more clarity on the potential impact of tariffs or will wait out tariffs that have already been imposed. As a result, it is likely that supply growth will slow, at least in the near term. Owners going through PIPs will be delayed in completing them and will likely wind up with a bigger bill that will need to be financed.
The costs of many food and beverage products imported into the U.S. have risen due to tariff policy, with categories like imported shellfish and coffee beans, among many others, affected. Operators have been identifying and purchasing substitute products, adjusting menu offerings and prices and communicating with customers in their efforts to mitigate the impact of tariffs.
Tariffs have impacted a number of areas in the hospitality industry, from demand to supply, from operating costs to construction costs. Owners and operators need to be nimble, and flexible, to successfully adapt to this challenging environment.
[1] Sources: U.S. Department of Agriculture, U.S. Energy Information Administration
[2] NAHB 2024 Construction Input Survey
