Branding a Hotel with the Marriott Name Can Be a Two-edged SwordBy
The company was covering the expenses for the hotel throughout this period. However, in a clear case of financial embezzlement, Marriott allegedly misused the funds it was getting from LIM to pay its own subsidiaries. Currently, the case is being handled by the local District Attorney’s Office in Warsaw.
Financial embezzlement is not the only charge in this Marriott criminal investigation. LIM also claims that Marriott caused even more financial distress to them by forbidding the use of their hotel for ad space.
According to the lawsuit LIM filed, it had secured a contract with an agency to place a large banner over the Marriott hotel with ads. The idea was to earn some of the lost profits back through this external revenue source. Since Marriott was the tenant of the building, it had the final word and declined to allow the space to be used.
This is one of the multiple cases where Marriott corporate offices decided to make life hard on their business partners. It may help current hotel owners or people who are in the process of building these facilities decipher if they want to be in business with Marriott.
Marriott Criminal Investigation in Poland and collaborations with hotels
Hotels that go into business with a corporate giant typically do so because it benefits both parties. Brands as large as Marriott provide a pool of customers to which smaller hotels wouldn’t necessarily have access. Plus, these chains' rewards programs can be another way to draw in guests.
This sounds great, but what happens when the corporate giant gets greedy? Spoiler alert: smaller hotel management companies tend to lose out on considerable amounts of money. Taking a corporate giant to court is complicated and messy.
Unfortunately, multiple hotel management companies found this out the hard way. Some even had to go through the most challenging times ever while receiving no help from their corporate partner.
Miami Hotel’s Fight to Remove Marriott as Manager
This situation between the Eden Roc Hotel in Miami and the Marriott brand was quite a messy divorce. It’s a perfect example of the dark side of getting into business with Marriott. Eden Rock filed to terminate its contract with Marriott in March 2012.
It wasn’t until a full year later and a court of appeals decision that the Eden Roc Hotel was able to drop Marriott as the venue's manager officially. Sadly, the lengthy legal battle will not be a valid option for smaller property management companies. This is especially true when a corporate giant like Marriott is willing to extend the legal battle.
In this situation, Marriott argued that it still had 43 years left on their contract with the Eden Roc Hotel. The hotel had no right to terminate the agreement before that time. While there are different arrangements between Marriott and other hotels, this case can be a warning for companies looking to sign on the dotted line to work with Marriott.
Most hotel brands will only enter into deals where the company can manage the property long-term. That’s true about Marriott and most other popular hotel brands. Marriott’s unique problem is its proven track record of mismanagement practices.
The ongoing situation in Poland only serves to confirm some of the fears about the brand. Anyone considering business with these hotel brands should read the contract terms carefully. That becomes even more important when the contracts run for as long as the one the Eden Roc Hotel signed.
Former Starwood Hotels Stuck Dealing with Marriott
The hotel owners potentially in the worst situation imaginable are former Starwood hotel owners. Starwood was a corporate giant that ran the Sheraton Hotel brand and multiple subsidiaries. This corporation was sold to the Marriott Group in 2016.
This merger forced hotel owners to rebrand their hotels and go into business with Marriott. In 2018, hotel owners were informed by Marriott that the rates they’d receive for nights paid by guests through the loyalty program would decrease drastically. When a guest pays for a night through the loyalty program, Marriott must pay that night to the hotel.
The company that owns a Marriott hotel in Thailand complained that Marriott was paying these nights at ridiculous rates. According to their lawsuit, Marriott would pay the hotel 47 dollars for a night that would regularly cost 120. That represented a major hotel loss when guests booked nights through the loyalty program.
These hotel owners argued that their agreement with Starwood did not follow those adverse conditions. The biggest problem for many of them is laid clear as day in the Eden Roc Hotel example. Trying to terminate a contract with Marriott will likely result in a lengthy legal battle.
Hotel owners should think long and hard before getting into business with Marriott. Perhaps the least concerning issue is the one involving the Miami hotel. Most large corporations signing a long-term lease will be reluctant to let it go without a fight.
The other issues point to much more concerning business practices. In the case of the Warsaw hotel, it represents the corporate partner being willing to quick the little guy down in the worst moment. That can be a big red flag that hotel owners who could be in the market for a rebrand shouldn’t ignore.
Today, the biggest question might be the value of a brand name. What’s undeniable is that Marriott has a large client base that uses their rewards program and only books through their site. The former Starwood hotel owners might argue that with such low commissions on those nights paid through the rewards program, partnering with the corporate giant doesn't make sense.
Will the potential risks be worth the reward? The fact that the answer to this question isn’t clear is exactly why working with this corporation can be a two-edged sword.