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

REIT claims lessee let hotel brand flounder

New York /
Jul.July 06, 2016 08:03 AM

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.


Related Articles

arrow_forward_ios
Vornado's Steve Roth and 220 Central Park South (Credit: Getty Images, iStock)
Free and clear: Vornado pays off debt at 220 CPS
Free and clear: Vornado pays off debt at 220 CPS
Vornado chairman and CEO Steven Roth, and 608 Fifth Avenue (Credit: Getty Images)
“Negative surprises”: Vornado execs talk retail struggles on Q2 earnings call
“Negative surprises”: Vornado execs talk retail struggles on Q2 earnings call
Steven Roth, CEO of Vornado and 640 Fifth Avenue (Credit: Getty Images and Vornado Realty Trust)
Bank of China issues $500M to Vornado in refi of 640 Fifth Avenue
Bank of China issues $500M to Vornado in refi of 640 Fifth Avenue
Vornado ceo Steven Roth and One Penn Plaza (Illustration by Kevin Cifuentes for The Real Deal with Getty Images, Vornado Realty Trust)
Vornado’s Roth sees “choppy” market, chides Penn skeptics
Vornado’s Roth sees “choppy” market, chides Penn skeptics
Edmonton Oilers' Daryl Katz with 220 Central Park South
Oilers owner buys $36M pad at Vornado’s 220 CPS
Oilers owner buys $36M pad at Vornado’s 220 CPS
Vornado’s Steven Roth and Governor Kathy Hochul with Penn 15 and Penn Station (Getty, DBOX, MTA)
Penn Station vote clears way for deals with developers
Penn Station vote clears way for deals with developers
City Planning Commissioner Hope Knight and a rendering of the new Penn Station (NYC Department of City Planning, Getty Images)
State greenlights massive Penn Station development plan
State greenlights massive Penn Station development plan
Vornado's Steve Roth, NY State governor Kathy Hochul and Moynihan Train Hall (Getty Images, iStock, Moynihan Train Hall)
Vornado in line for $1.2B tax break at Penn: report
Vornado in line for $1.2B tax break at Penn: report
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...