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Nobody Asked me, But… No. 74

The Triumph of Public Relations; Helpful Hotels; Court Rules Holiday Inn
Commits “Reprehensible Fraud”; Quote of the Month

 
By Stanley Turkel, CMHS, ISHC
March 16, 2011

1. The Triumph of Public Relations

In February 2011, I reported that 50 new hotel brands had been announced in the past six months, adding to the 100+ already in existence.  I wondered if the announcement of these new brands was the triumph of public relations over common sense.

Here are eight more new brand announcements:
 
  • Kerry by Shangi- La Hotels and Resorts
  • Chapter by Swire Hotels
  • Qube
  • Dukes by Seven Tides
  • Nobu
  • Missoni by Rezidor
  • Ayala 

Meanwhile, Otus Analytics, a division of the investment bank Otus & Co. has recently issued their 2011 edition of Hotel Chains in Europe 2011. The full report runs to almost 500 pages covering nearly 900 brands and 15,300 hotels in Europe, most quite small.

A free 20-page summary is available from www.info@hotelanalyst.co.uk.  The European market is dominated by Accor which has more than 250,000 rooms and four of the top brands.  But behind Accor are another seven hundred companies, each with at least four hotels and almost nine hundred brands:   

                                    Top 10 brands in Europe at end of 2010

                       Brand                         Hotels                            Rooms

                        Ibis                              709                              75460

                        Mercure                       474                              54032

                        Holiday Inn                 277                              45526

                        Novotel                       265                              43420

                        Premier Inn                 586                              42809

                        NH Hotels                   275                              41213

                        Hilton                          152                              39594

                        Radisson Blu               172                              38740

                        Etap                             421                              35691

                       Travelodge                  458                              29775 
 

2.  Helpful Hotels

Did you know that a handful of hotels are designing suites for families with autistic children?  While we might face a long wait for this to become the norm rather than a rare and wonderful opportunity, look for hotels that offer amenities designed to make it less stressful to travel with special needs children.  The Wyndham Garden Hotel in Austin, Texas has “thoughtful rooms” that include a door alarm, childproofed drawers, cushioned table corners, shorter strings on the window blinds and covered outlets.  They also didn’t forget to include toys, books, restaurant items for special diets (soy protein, GFCF) and…staff trained to manage children with autism.  The Clinton Hotel in Tenafly, New Jersey also has a special suite with safety features such as unbreakable glassware, rounded corners on furniture, a door alarm, a TV secured to the wall and decorations that are glued down. (Source: June 15, 2010 USA Today article, “Wyndham Hotel in Austin Offers Autism-Aware Rooms”).

3.  Court Rules Holiday Inn Commits “Reprehensible Fraud”

Here, in full, is an important article from that excellent website:  www.bluemaumau.org

January 3, 2011:

Marion, Ark.- Kemmons Wilson must be spinning in his grave.  The founder of the Holiday Inn chain was friends with J.O. “Buddy” House.

Back in the 1950’s the two worked on several construction projects together.

 

Times change.

 

In a blistering decision issued February 23, a three-judge panel of the Arkansas Court of Appeal reversed a trial court’s reduction of punitive damages and held:

 

Holiday Inn, a multinational corporation, failed to disclose valuable information to a businessman who had worked with and trusted the company for over half a century.  In doing so, Holiday Inn caused the businessman, over a period of more than a year, to expend significant sums of money on a hotel that he believed would be relicensed but whose relincensure certain Holiday Inn personnel were determined to thwart.  Further, the nondisclosure of Holiday Inn’s business plan, which Holiday Inn knew that [the franchisee] was entitled to have, combined with providing the plan to [the franchisee’s] competitor, indicates, at the very least, outright disregard of [the franchisee’s] interest as a franchisee, and, at most, a deliberate attempt by certain Holiday Inn employees to reap their own economic benefits by keeping [the franchisee] in the dark.  On these facts, notwithstanding the trial court’s finding that Holiday Inn’s nondisclosure appeared to be “more of an accident” we conclude that Holiday Inn’s degree of reprehensibility supports a significant punitive damages award.

 

Franchisee Buddy House had been asked by Holiday Inn to consider taking over a decrepit property in Wichita Falls, Texas to convert it into a Holiday Inn hotel.  The renovation cost was substantial.  House told Holiday Inn that he would need a 15 or 20-year license to recoup the investment.  Holiday Inn was unwilling to grant anything except a 10 year license.  But VP of franchising Steve Romanelle told House that if the hotel was run well, there was no reason to believe that the franchisor would deny any extension.

 

The renovation was a great success. House received offers to buy the hotel for $15 million. He turned them down and applied for early relicensure with Holiday Inn.  After some analysis and suggestions by the franchisor, House spent $3M on further renovations.

 

Holiday Inn’s director of franchise development Greg Aden would not get a commission if House’s request was granted, but if Aden persuaded Holiday Inn to deny House and instead approve the conversion of a Radisson property, then Greg Aden would get a $13,000 commission.  Aden wrote a report that recommended the Radisson conversion. 

 

After all, he had plans for his commission.

 

After stringing along Buddy House, the franchisor ultimately went with Aden’s plan and so Buddy House was forced to reflag before ultimately selling the hotel at a loss for $5 million.

 

After House sued Holiday Inn, a jury found that Holiday Inn had defrauded Buddy.  On appeal, the three judge court discussed just how badly Holiday Inn had cheated him and the failure of Holiday Inn to disclose Aden’s plan.  The judge reasoned:

 

Buddy House had a long-term relationship with Holiday Inn characterized by honesty, trust, and the free flow of pertinent information.  He testified that [Holiday Inn’s] assurances at the onset of licensure in 1995 led him to believe that he would be relicensed after ten years if the hotel was operated appropriately.  Yet, despite Holiday Inn’s having provided such an assurance to House, it failed to appraise House of an internal business plan, developed only four years into his licensing period, that advocated licensure of another facility instead of renewal of his license.  A duty of disclosure may exist where information is peculiarly within the knowledge of one party and is of such a nature that the other party is justified in assuming its nonexistence.

 

The trial court jury found that Holiday Inn had committed fraud, to which the appellate court added, “the jury’s verdict on fraud was supported by substantial evidence.”

 

Stan Turkel, one of the hotel industry’s top consultants and author of Great American Hoteliers, which reverently devotes a full chapter to Holiday Inn’s founder Kemmons Wilson, observes, “This sequence of events does not surprise me.  Holiday Inn’s director of franchise development behaved like most franchisors- in his own self interest.  Sentiment and historic memory count for naught when cold hard cash is involved.  If the courts would acknowledge the existence of a fiduciary duty owed by franchisors to franchisees, such ‘reprehensible’ behavior could not occur.”

 

5.  Quote of the Month

“Excellence is not a singular act, but a habit.  You are what you repeatedly do”

                                                                        Shaquille O’Neal


Stanley Turkel, CMHS, ISHC recently published his new book, Great American Hoteliers: Pioneers of the Hotel Industry.  It contains 359 pages, 25 illustrations and 16 chapters.  It also has a foreword (by Stephen Rushmore), preface, introduction, bibliography and index.

Ed Watkins, Editor of Lodging Hospitality wrote, “The lodging industry typically doesn’t spend a lot of time considering its past.  Some may find that odd since compared to many other businesses (computers, automobiles aircraft), the hotel business is one of oldest if not the oldest, in the history of man.  That changed recently with the publication of.... Great American Hoteliers: Pioneers of the Hotel Industry, a fascinating and entertaining series of profiles of 16 men who author Stanley Turkel argues were the builders of the modern American hotel industry.  That’s significant because due to the efforts of these titans (and others, of course), the American style of hotelkeeping long surpassed the European tradition that reigned for centuries.

Some of the profiles contain cover names (Hilton, Marriott, Johnson, Wilson) familiar to even casual students of hotel or U.S. history.  Sadly, just one of the pioneers covered the book (John Q. Hammons) is still alive and active in the industry.  To me, the more interesting tales cover hoteliers about whom I knew little before reading his book but now have a greater appreciation for their contributions.

The most compelling story focuses on Kanjibhai Manchhubhai Patel who Turkel identifies as the first Indian-American hotelier.  K.M. Patel arrived in San Francisco in 1923 and soon began operating a small residential hotel in the city.  The rest, as they say, is history; Today, Indian-American hoteliers dominate the industry with their trade association, AAHOA, recently surpassing 10,000 members.  As Turkel says, this community represents a true American success story.

To order the book, go to www.greatamericanhoteliers.com.  I heartily recommend it.”

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Contact: 

Stanley Turkel, MHS, ISHC
917-628-8549
stanturkel@aol.com

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Also See: Nobody Asked Me, But… No. 73: Impertinent Question Still Seeking a Pertinent Answer; The Fountain of Old Age; Quote of the Month / Stanley Turkel / February 2011

Impertinent Question In Search of a Pertinent Answer; Does The Industry Really Need Another Brand?; Hilton’s Hands Get Slapped in Starwood Settlement; China- Based Developers Buy U.S. Hotels; Quote of the Month / Stanley Turkel / January 2011

Nobody Asked Me, But… No. 71 - Impertinent Questions Still Seeking Pertinent Answers; The Baseball Business…Where Next?; Quote of the Month / Stanley Turkel / December 2010

Nobody Asked Me, But… No. 70 -John Q. Hammons, Impertinent Question, Quote of the Month / Stanley Turkel / November 2010

Nobody Asked Me, But… No. 69 - Large Banks Creating Crisis For Hoteliers; Are Room Telephones Obsolete? / Stanley Turkel / October 2010

Impertinent Questions in Search of Pertinent Answers; BlueMauMau.org: The Best Franchise Website; Free Wi-Fi at Top of Amenity List / Stanley Turkel / September 2010

Nobody Asked Me, But… No. 67 : Stanley Turkel's Review of Budget/Economy Hotels Following a Three Week Pennsylvania Road Odyssey / Stanley Turkel / August 2010

Nobody Asked Me, But… No. 66 : Recognizing Three Hotel Industry Experts Whose Accomplishments Are Unique - Bjorn Hanson, Peter Greenberg and Richard Warnick / Stanley Turkel / July 2010

Nobody Asked Me, But… No. 65: A Well-Deserved Compliment for Steve Rushmore; Impertinent Questions in Search of Pertinent Answers / Stanley Turkel / June 2010

Nobody Asked Me, But… No. 64: Best Western Finally Makes a Move; Cuba, The Caribbean’s Hottest Destination / Stanley Turkel / May 2010

Nobody Asked Me, But - No. 63: Can Airlines Learn From Hotels?; Memo to Ian Schrager / Stanley Turkel / April 2010

Nobody Asked Me, But No. 62 / Do the Radisson Franchisees Agree with Carlson's billion-dollar Makeover Program? At Last: A Win-Win Victory for Tourism; Congratulations to the Harris Rosen Foundation / Stanley Turkel / March 2010
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