An Indian-American hotel owner has filed a lawsuit against InterContinental Hotels Group, the world’s largest hotel company by room count, behind popular chains such as Holiday Inn, Holiday Inn Express and Hotel Holiday Inn Resorts.
Louisiana-based Vimal Patel, who owns several hotels, said piling additional franchise fees coupled with deteriorating income due to the pandemic left him with no option but to file the suit.
The IHG operates approximately 5,600 hotels across more than 15 brands. Patel, the main plaintiff in the lawsuit, is the owner of Park 80, an HHF Franchisee1 pursuant to a franchise agreement with HHF dated February 25, 2014, entitled “Holiday Hospitality Franchising, LLC Holiday Inn Express Hotel New Development License Agreement”.
The case filed in the Eastern District of Louisiana is a class action complaint that has alleged the “Defendants have and continue to engage in unconscionable, fraudulent, unlawful, anticompetitive and discriminatory business practices in connection with the IHG Hotel franchise system.”
Patel spoke to indica News in detail about filing the lawsuit.
“A lot has changed the way hotel business runs in the past 10, 15 years,” he said. “They [the IHG] keep imposing additional costs… and what used to be four line items in the franchise bill has become two -page franchise bill and all this was magnified by the pandemic.”
Patel alleged the IHG had mandated vendor program where “you buy from selected vendors and you cannot go out… and there are similar products at a competitive price at other avenues.”
The lawsuit says the IHG/HHF does not permit franchisees to purchase, for example, internet connections in the open market and instead requires franchisees, in most instances, to pay more than double the price for lower speeds than what franchisees could purchase independently from the same or alternate sources.
“It is not just me,” Patel said. “There are several hundreds of [hotel] owners and they are concerned about that.”
The IHG, he alleged, acts in a “bureaucratic red tape” kind of way and hotel owners “never get resolution” to their problems.
He said that though the IHG has not been engaged in any marketing activities or efforts for approximately a year during the pandemic, it continues to require franchisees to pay significant marketing-related fees for which they receive nothing in return.
“It doesn’t matter how much you lose or make money, there is a fixed franchise fee, franchise bill, and everything else,” Patel said. “Even if it comes out of your pocket putting for the payroll, mortgage, insurance, utilities. So you lose money and they make money.
“Even if the revenue is low, they are going to pay,” said Patel.
“Technology is also is a new challenge,” Patel said. “It is a combination of things, OTA (online travel agencies) such as Booking.com and Expedia…”
He said hotel owners lose money when people book through OTA. “If you pay, for example, Expedia $100, probably the hotel is getting $88 to $82.”
According to the lawsuit, the IHG/HHF arbitrarily exercises this purported right to impose fees including, but not limited to, travel agent commission fees, in bad faith.
“Our income is deteriorating,” said Patel.
Did the Paycheck Protection Program money not help? Patel said: “If you have $50,000 mortgage and your occupancy has gone down due to pandemic that is not going to help much.”
Asked what he wanted from the IHG, Patel said: “Our expectation is to have fair and ethical business practices were both sides make money. That is all we are asking.”
Patel, who came to the US from Gujarat in 1991, said he was not scared about taking on a big group.
“If I am fearful, if we can’t stand for what is right, what I would be teaching my daughter?” he said.