Let the mayhem begin! At last, the hotel industry has something to talk about around the water cooler other than freefalling occupancy, ADR and RevPAR figures. Plenty of eyes will be focused on Starwood Hotels & Resorts Worldwide and Hilton Hotels Corporation as they duke it out over a lawsuit that Starwood filed last week.
A number of industry gadflies are eagerly anticipating the tit-for-tat revelations that are bound to become public knowledge if the suit actually goes to court. And man, if the suit actually makes it to court, well, it could turn into a TV miniseries.
Starwood sued Hilton and two former Starwood executives now working for Hilton, accusing them of stealing secrets regarding Starwood’s development of its highly successful W brand, among others. Starwood, a publicly traded company that uses HOT as its symbol on the New York Stock Exchange, believes that former executives Ross Klein and Amar Lalvani stole documents that Hilton used to develop its new Denizen brand.
The lawsuit alleges that Klein, who formerly served as president of Starwood’s luxury group, and Lalvani, the former senior vice president of Starwood’s luxury group, stole a ton of proprietary and highly confidential HOT information that Starwood believes was used to expedite Hilton’s launch of Denizen and reposition brands such as Waldorf-Astoria. Denizen, a lifestyle brand that was introduced in March, isn’t expected to open a hotel until 2010. Klein and Lalvani joined Hilton in June 2008, and Starwood alleges that the two stole more than 100,000 electronic files containing confidential information before and after they joined Hilton, in violation of both their contractual and fiduciary duties.
Hilton has said the suit is without merit and the company will defend itself accordingly. The one thing HOT has in its favor is that just before Hilton announced the details of the Denizen brand it sent Starwood a number of large boxes of hard copy documents and computer hard drives, zip drives and thumb drives containing the more than 100,000 electronic files downloaded from Starwood’s network. Starwood said the delivery was in response to a request to preserve documents related to another contract dispute with Klein, that he was violating agreements by recruiting other HOT employees to Hilton.
One source said HOT became particularly, well, hot, over the Denizen name Hilton settled on. Starwood apparently had a concept called “the Zen Den” that it planned to launch in its W properties, and executives there believe that was the foundation for Hilton’s “den of Zen.”
What comes out of this lawsuit will be interesting. I hear Starwood wants nothing less than Hilton killing the Denizen brand. Hilton isn’t likely to go along with that. Therefore, I expect it to go to trial at some point. While that trial date might be a year or two away, there’s going to be plenty of gossip floating around the industry regarding this major tiff. Hilton is going through plenty of changes, including a reshuffled executive lineup and relocating its headquarters to Virginia from California, and the last thing it wants is a prolonged disagreement.
However, there are plenty of egos on both sides, and let’s face it, if the allegations are true, it is a business-changing situation. I suspect neither side will give much ground, so perhaps this has Court TV written all over it. Nearly everyone likes to see two heavyweights battle it out, and if you add the spice of espionage and trade secrets, it is sure to grab the general public’s attention.
