Corrupt environment for Hospitality Startups

A recent write up in Hotels Magazine talks about how corruption enjoys start up hospitality ventures at an international level. Whether obtaining prime locations, building, securing inspection and food permits, or creating partnerships to advance the development, operation and security of restaurants and hotels, the very nature of the hospitality industry lends itself to risk arising from bribery and corruption.

As demand grows for economic expansion in new and emerging markets in Africa, Brazil and Southeast Asia and as the international political landscape changes in broader terms in places such as China, India and the Middle East, hospitality companies face monumental challenges in protecting their organizations from bribery and corruption. Common issues the industry faces include:

  • Securing prime locations — as all hospitality executives know, it’s all about location, location, location, but with so much red tape involved with identification and acquisitions for real estate and property development, this becomes a hotbed for trouble
  • Safety and security — ensuring guest safety and security is paramount for hotels and hospitality businesses, but this means they must rely on local authorities, which in many foreign countries are a breeding ground for bribery and corruption
  • Supply chain and vendors/suppliers — when it comes to dealing with the supply of goods and services in foreign countries, hospitality businesses are at risk of being involved (often unintentionally or through a third party’s actions) in kickbacks, and this especially true in regions where infrastructure is underdeveloped or customs is less stringent due to poor government oversight
  • Franchisees — many in the hospitality industry take the position that the nature of their franchise relationship protects them from violations of anti-bribery and anti-corruption laws and regulations by their franchisees, but since they obtain a financial benefit in exchange for the franchisee’s use of their brand this position could be subject to challenge by regulators
  • Partnerships with government or government-controlled organizations — in many countries, doing business with a government-run entity is unavoidable and in politically unstable nations, government-owned entities can become corrupt

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