LIM, the company that owns the building where a Marriott hotel still operates in the center of Warsaw, Poland, is suing the brand. According to the lawsuit filed by LIM, Marriott used funds given to them by LIM to pay off its subsidiaries during the COVID-19 lockdowns. LIM claims that it was funding the operations of the Marriott hotel at the time.
The financial embezzlement charges that LIM is bringing up against Marriott are not the only issue between the parties. LIM also claims that Marriott refused to allow them to place a billboard on the hotel building. The company had secured a contract to rent the hotel building for ad space.
Apparently, the billboard would not have caused any type of disruption to the hotel’s operations, especially during the pandemic when the venue was operating at around 30% capacity. Marriott, however, was not sold on the idea of having ads placed on its hotel. The deal ultimately fell through, which represented more losses for LIM.
The case is being overseen by the local District Attorney’s office in Warsaw. According to local news outlets, this issue will likely continue until next year. That could be quite concerning from LIM’s standpoint, as it could risk losing even more revenue.
Without question, the COVID pandemic was a difficult time for the hotel industry. Companies like LIM even suggest that allowing hotels to remain open, but at a limited capacity, was more detrimental to their business than closing. Marriott, for its part, came out of the COVID pandemic with quite a few legal issues to settle.
The Latest Marriott Criminal Investigation in Poland – What is happening to small businesses?
Private hotel owners who decide to stamp the name of a well-known brand to their hotel name do so because they feel it can help them attract new customers. The most infamous hotel rebranding was that of the Taj Mahal in Atlantic City when the Trump brand bought it. That may have been a different scenario, but the rebranding ultimately resulted in bankruptcy.
Unfortunately, for some private hotel owners and property management companies, working with the Marriott brand has also led them to financial troubles. Without a doubt, that’s the opposite effect that they hoped to obtain by working with the largest hotel company in the world.
What’s causing these management companies to find themselves in hot water after going into business with the corporate giant?
According to multiple reports that have appeared over the years, it’s not one issue that’s causing these smaller businesses trouble. Instead, a set of Marriott criminal investigations seemingly continue to prove that doing business with this brand may not be in everyone’s best interest.
Marriot and Its Insurance Company Sued Over COVID Losses
The situation in Poland was not the only Marriott criminal investigation to come out of the pandemic. Two Marriott hotels in New York sued Marriott and the insurance company Zurich. In this case, the lawsuit claims both Marriott and the insurance company failed to provide coverage for the losses the hotels suffered during this tough time.
These hotels, a Fairfield and a SpringHill suites property, both located in Syracuse, filed a business insurance claim with Zurich. The claim was meant to get the insurance company to help cover the losses the two properties sustained. According to the hotel owners, the combined losses total 6.5 million dollars.
Zurich rejected their claim after the insurance company claimed a virus exclusion clause in the contract. According to the hotel owners, that clause was never part of the original agreement with the insurance company. After the claim had been rejected, they turned to Marriott and found a similar response.
The Syracuse hotel owners sued Marriott because they claimed the chain was obligated to provide “all-risk” insurance. Ultimately, the hotel chain cited the same virus exclusion clause to get out of settling their claims.
Hotels Losing Money Over Marriott Bonvoy Program Scheme
Both of the previous instances reflect Marriot’s unwillingness to help out its business partners in a time of need. Hotel owners who may still be keen to work with the brand could justify their decision by saying another pandemic won’t happen soon. While that’s certainly a hope everyone can share, what’s also true is that Marriott’s issues with hotel owners precede the pandemic.
In 2020, a Thailand-based hotel management company sued Marriott over the payment of nights that guests redeemed through the Marriott Bonvoy scheme. The hotels were former Starwood-branded properties but were rebranded to Marriotts after these two companies merged in 2018.
The Thailand-based hotels claim that in 2019, Marriott reduced the prices it paid the hotel when a customer was granted a free night through the Marriott Bonvoy rewards program. When a guest redeems a free night through the program, Marriott pays that property the price per night.
The problem is that allegedly, the Marriott corporation sliced the prices it paid for those nights to almost a third of the actual value. In the case of the Thailand hotels, the claim is that Marriot paid 47 dollars per night when the average nightly rate was actually around 120 dollars.
Marriott has always fought back against these allegations. Claiming that Minor, the company behind the Thailand hotels, has a hidden agenda against the brand. It didn’t deny, though, that this price reduction was taking place.
Both cases where Marriott allegedly refused to pay hotel owners or used certain schemes to defraud them are concerning. Is it worth it for hotel owners to take the risk just to be in business with the biggest hotel chain in the world? It depends on the value the brand brings to a property these days.
The naming rights may not be as important to hotel owners as the potential client pool that comes directly from the Marriott site. That’s sadly where the other incident involving the Marriott brand comes into play. What good is being part of a program that pays an extremely low rate for the “free” nights scheme?
There are way more than just three legal instances that Marriott has been involved in over the years. In many of these situations, hotel owners usually get the short end of the stick. These situations could be a warning sign for anyone looking to join forces with any hotel brand, not just Marriott.