In a significant legal move, Marriott International has filed a lawsuit against Pride Hotels, seeking $2.6 million in damages. The lawsuit revolves around the use of two New York hotels, originally slated to be dual-branded as Aloft and Element properties, which are now housing migrants.
Marriott's Legal Battle Unfolds
The agreement to develop these hotels near John F. Kennedy International Airport was initially signed in 2015 with Starwood Hotels & Resorts, before Marriott acquired Starwood in 2016. However, the opening of the 283-room dual-branded property in Queens faced multiple delays. In late 2023, Pride Hotels struck a deal with New York City to convert the unfinished properties into shelters for migrants and asylum seekers. This decision, according to Marriott, violated the original franchise agreements.
ALSO SEE: Conversion-Led Growth Propels Choice Hotels Forward
Marriott claims that instead of opening the hotels under its brand, Pride Hotels entered a profitable agreement with the City of New York, allegedly without Marriott’s consent. The lawsuit asserts that this move not only breached the franchise agreements but also deprived Marriott of significant revenue from franchise fees and brand royalties.
Impact on Marriott's Market Position
The two hotels are situated in a highly competitive market, given their proximity to JFK International Airport. Marriott’s lawsuit highlights concerns that re-entering this market could be a lengthy and challenging process due to its saturation with existing hotels. Even if Marriott manages to regain control of these properties, the legal battle could impede its ability to capitalize on the desirable location.
Adding to Marriott’s grievances, the lawsuit includes claims that the hotels still bear Aloft and Element branding, further complicating the situation. Marriott insists that this unauthorized use of its trademarks is causing damage to its brand reputation.
The Broader Context of New York's Hotel Industry
This case is unfolding against a backdrop where one in five New York hotels is reportedly operating as a shelter, significantly impacting the city's hotel industry. The shift in hotel usage has led to fluctuating room rates and a decrease in available accommodations for traditional hotel guests. As many of these hotels may never reopen to the public, the dynamics of New York’s hospitality market could be permanently altered.
Marriott’s legal action is not just about recovering lost fees but also about protecting its brand and market share in an increasingly complex and competitive environment. The outcome of this lawsuit could set a precedent for how hotel franchise agreements are enforced in situations where properties are repurposed without the franchisor's approval.
In conclusion, Marriott's lawsuit against Pride Hotels underscores the tension between franchise agreements and the evolving needs of urban centers like New York City. As the case progresses, it will be closely watched by the hospitality industry, potentially influencing future dealings between hotel chains and property owners in similar situations.
Source: Loyalty Lobby