Marriott has filed an interesting lawsuit against the owners of what was supposed to become a franchised Marriott hotel, after the owners instead decided to turn the property into a migrant shelter.
Aloft & Element near New York JFK becomes a migrant shelter
Marriott has filed a $2.6 million lawsuit against the owners of a hotel in New York, located in Queens, near JFK Airport. The 283-room hotel was supposed to open to the public as of November 2023, as a dual-branded Aloft and Element property.
There aren’t that many airport hotels near JFK, so it was a significant addition to the Marriott portfolio. This agreement was actually signed all the way back in 2015, so this property was a long time coming for the Marriott brand, as there were construction delays, and then the pandemic happened.
However, in August 2023, a few months ahead of the planned opening, the owners of the hotel seemed to change their mind. The decision was made for the property to become a shelter for migrants, thanks to a “lucrative” agreement. The owners of the hotel didn’t even initially remove Marriott signs and branding, or pay franchise fees, further violating the agreement with Marriott.
Marriott reportedly tried to strike a deal with the owners of the hotel that would see Marriott still getting some fees for this arrangement, but that was seemingly rejected by the owners, leading to this lawsuit. They seemed to think they could just discontinue their agreement with Marriott altogether.
In recent years, we’ve seen dozens of hotels in New York stop welcoming tourists, and instead strike deals with the government, to become shelters for migrants. At this point, more than one in five hotels in New York City are shelters, and nearly half of hotels around JFK Airport are shelters.
These shelter contracts have become lucrative for the owners of many properties, especially as the hotel market in New York City has otherwise been pretty slow to recover.
The city reportedly pays anywhere from $55 to $385 per night for these rooms to be used a shelters, so you can quickly see how that becomes a lucrative revenue source for hotel owners, especially when you consider the guaranteed and consistent occupancy that hotels can achieve with this agreement.
The owners of the property have defended themselves by stating that it’s not “economically feasible” to operate as a hotel, given “the poor state of the economy and continued slowdown in the hospitality industry.”
Marriott seems to have a point here, I think?
I’m not writing about this topic because I’m looking to get into a political debate, but rather I find this to be an interesting situation. I’m of course no lawyer, though on the surface it seems to me like Marriott has a case here.
While the lawsuit contains some details about what the contract looked like when it was signed, it doesn’t have all the details. My non-lawyer assumption would be that:
- If a hotel just ends up not opening (whether it’s due to property foreclosure, market changes, or whatever), the hotel wouldn’t be on the hook for fees to Marriott
- If a hotel at the last minute decides that it wants to rebrand and join another hotel group, the hotel would be on the hook for some kind of early termination fees, reflecting a violation in the contract
- However, this is a unique situation, since the property isn’t operating as a hotel, but rather has gone into a different business, operating as a shelter, which is a different concept altogether
When these contracts were signed, I’d assume the concept of a hotel being converted into a shelter wasn’t explicitly addressed, and probably wasn’t on the radar. I think it’s fair that Marriott would be entitled to something here, given that the property was fully designed with Marriott specs, including design.
Bottom line
Marriott is suing a would-be franchisee for $2.6 million, after the owners abandoned plans for a dual Aloft and Element property, and instead turned it into a migrant shelter. The major hotel groups are involved in endless lawsuits with hotel owners, given how many dispute there are over contracts.
However, I have to imagine that a hotel owner deciding to turn a Marriott into a shelter is one of the more unusual lawsuits, which might not be explicitly addressed in these contracts. I’m curious to see what comes of this, or if some private settlement ends up being reached.
What do you make of this Marriott lawsuit?
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