The Real Deal New York

Vornado lobs $30M lawsuit against Times Square Crowne Plaza hotel operator

REIT claims lessee let hotel brand flounder

July 06, 2016 08:03AM
By Kathryn Brenzel

Times Square Crowne Plaza (inset: Steven Roth)

Times Square Crowne Plaza (inset: Steven Roth)

Lackluster marketing and an “abysmal” public perception have dragged down business at Vornado Realty Trust’s Times Square hotel, and its operator is to blame, according to a new lawsuit filed by the REIT.

Vornado filed a $30 million lawsuit in Manhattan Supreme Court on Tuesday against Holiday Hospitality — the franchising arm of the InterContinental Hotels Group (IHG) — claiming that the company let its Crowne Plaza brand fall into disarray. The company’s “woeful” marketing efforts and the “alarming underperformance” of the hotel brand represents a breach of its licensing agreement with Vornado, which requires it to promote Crowne Plaza as an upscale hotel and “enhance the public image and reputation [of the hotel],” the lawsuit claims.

“Rather than promoting and supporting its owner’s hotel, the Crowne Plaza brand is an albatross around the neck of the business — dragging with it the property owner’s half-billion dollar investment and its profitability,” Vornado’s lawyers wrote in the suit. “Because owners recognize the detriment of affiliation with the Crowne Plaza brand, there is an anemic pipeline of Crowne Plaza branded hotels in the United States.”

In May, Vornado put the hotel operator on notice, claiming it had breached its licensing agreement at 1601 Broadway and set a 40-day deadline to begin addressing problems, the lawsuit says.

When Holiday didn’t make any requested changes, the REIT told the company that it would terminate the licensing agreement — effective August 8, the suit states. A spokesperson for Holiday’s parent company IHG said that the company does not comment on pending litigation but intends to “enforce our rights under the license agreement we have with the owner.”

The lawsuit comes more than a year after Vornado upped its ownership stake in the hotel from 11 to 33 percent by buying out its joint venture partner for $39 million.

In its lawsuit, Vornado argues that Holiday spent a paltry amount of money on advertising the hotel brand — only $4 million in the past six years. Crowne Plaza was the only Holiday brand to see a net loss in rooms globally in 2015, losing 2,050 rooms in the Americas alone, according to the lawsuit. The hotel brand consistently ranks “at or near the bottom of third-party rankings,” Vornado claims. The REIT is seeking $30 million in damages in relation to the Times Square hotel.

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