|By Kim Leonard and Rick Stouffer, The
Pittsburgh Tribune-ReviewMcClatchy-Tribune Regional News
Sept. 04, 2010--Stripped of its ties to the Hilton chain, Downtown's biggest hotel faces a second crisis: Mortgage holder Black Rock Financial Management Inc. foreclosed on the property.
The New York City-based company filed a complaint Friday in Allegheny County Common Pleas Court, arguing that because the Pittsburgh Hilton Hotel lost its franchise license and the use of the Hilton reservation system the day before, Black Rock is entitled to take over ownership of the troubled 713-room hotel.
The foreclosure is not expected to result in an immediate closure of the high-profile hotel fronting Point State Park.
"It's regular hotel operations, on a day-to-day basis," said Kerry Ford, a spokeswoman for the ownership group that includes Shubh Hotels Pittsburgh LLC and Black Diamond Hospitality LLC.
But losing the Hilton name severs the hotel's link to a worldwide reservations and event scheduling network that accounts for as much as half of its business, experts said. Hilton Hotels & Resorts on Thursday pulled the franchise license for the hotel after more than 51 years.
A major brand connection is a lifeline in today's recession-hit hospitality industry, they said, and unless the hotel -- long plagued by stalled construction, legal and financial disputes -- patches things up with Hilton or signs on with another chain, the impact will be devastating.
"When a property is de-flagged, especially with a major brand, it has a huge impact," said Eric Belfrage, vice president with CB Richard Ellis Hotels of Columbus.
The Pittsburgh Hilton no longer appears on the McLean, Va.-based chain's website, and that could mean a 30 percent drop in business, he said, adding, "You need a lot of distribution channels to fill a major hotel."
At travel website Hotels.com, "The hotel is not bookable for stays on our site," spokeswoman Taylor Cole said. The company's market managers work with hotel chains or owners, she said, but she couldn't say yesterday why or when the hotel became unavailable.
Shubh Hotels owner Atul Bisaria said the hotel's owners "are negotiating" but would give no further details. Hilton representatives couldn't be reached for comment.
Ford said she knew of no cancellations yesterday, and customers continued to call the hotel to make reservations.
Shubh representatives no longer are on the Gateway Center property, she said; the latest management company -- Prism Hotels & Resorts of Dallas -- continues to run the hotel and serve guests. Prism was appointed by Shubh and approved by Black Rock, she said.
Black Rock claims in court documents it is owed $49.7 million -- the entire amount of the mortgage, plus interest.
Ownership of the Hilton changed Thursday. Tampa cardiologist Kiran Patel took over an 89 percent ownership under the Black Diamond Hospitality LLC name; Bisaria, who previously controlled the property, owned the rest under the deal.
Jay Lalwani, Black Diamond's CEO, said he didn't know about the foreclosure filing, but blamed a previous management company for the low satisfaction scores. "Let's be technical -- Hilton stopped listing us on their reservation system. They didn't pull their flag.
"They are putting the squeeze on Shubh by this action. They want an owner with no baggage, and Black Rock wants the same," Lalwani said.
David Martin, chief operating officer with Prism, said the hotel failed Hilton's recent sanitation and quality assurance audits and scored low on a satisfaction assessment, and that contributed to losing the franchise. Prism, the third management company in recent months, came in Aug. 26 and "found the property very dirty; the guest rooms were dusty and dirty," he said.
"We came in and we pressure sprayed the kitchen. We painted kitchen ceilings. We did all that we could, but we still failed the audits," he said.
Experts said restoring the Hilton tie is vital.
Tom Blake, a vice president with PKF Consulting, a hospitality industry firm in Portland, Maine, said the hotel is geared for groups that book blocks of rooms -- many using the Hilton Honors loyalty system -- for business meetings or events.
Chains such as Hilton, in addition, employ sales teams that strike deals with major corporations to house employees as they travel to various cities, other experts said.
Ford wouldn't discuss occupancy rates. But banquet servers and other members of Unite Here Local 57 have been working less as business slowed, spokeswoman Ivana Krajcinovic said. The union represents about 200 workers at the hotel.
All hotels struggled in the recession, she said, but "it's been exaggerated" there as conditions deteriorated.
Frank Amedia, construction manager for a recently resumed renovation and expansion, said work will continue. "We keep moving," he said.
Allegheny County Executive Dan Onorato plans to contact Hilton corporate officials, spokeswoman Megan Dardanell said. "The Hilton brand is important to us and to our region," she said.
Tom Martini, general manager of the Westin Convention Center Hotel, said the Hilton's uncertain status is worrisome for Downtown.
"That hotel is a huge part of the convention package for the city," he said, noting the Hilton has the highest room count and largest ballroom locally. "We need that hotel to be able to market to large conventions coming into the city."
To see more of The Pittsburgh Tribune-Review or to subscribe to the newspaper, go to http://www.pittsburghlive.com/x/pittsburghtrib/.
Copyright (c) 2010, The Pittsburgh Tribune-Review
Distributed by McClatchy-Tribune Information Services. For more information about the content services offered by McClatchy-Tribune Information Services (MCT), visit www.mctinfoservices.com, e-mail email@example.com, or call 866-280-5210 (outside the United States, call +1 312-222-4544). NASDAQ:DMND,