Here is Hilton’s Statement

In the lawsuit, originally filed in mid-2008, Starwood accused Hilton of stealing thousands of confidential documents and material which had information on how to create, brand and operate a boutique/lifestyle hotel brand. At the time, Hilton had wooed two Starwood Executives, and essentially their entire support staff and in a matter of months created the Denizen hotel brand. The support staff and executives had intimate knowledge of Starwood’s W hotel brand.

Starwood was sure to win this case from the beginning – starting with the drop shipment of thousands of propriary Starwood documents to Starwood’s corporate headquarters with a note from Hilton’s lawyers stating in essence “we found these in our possession, and thought they should be sent back to you”.

In the aftermath of the lawsuit, Hilton’s boutique/lifestyle brand – Denizen – was completely cancelled, and their entire luxury development team fired, it went right up to the top with Steve Goldman stepping down from Hilton.

The settlement between Starwood & Hilton has been detailed as containing the following three items

1. A moratorium on Hilton working on the development/planning/creation of any lifestyle brand until January 2013
2. A cash sum payment to Starwood, the amount of  which was not detailed
3. The supervision of Hilton by federally appointed monitors to ensure Hilton will be abiding by these rules.

In addition, it mentioned that the Federal Grand Jury investigation is still continuing and this settlement has nothing to do with that investigation. According to the Wall Street Journal, Hilton has been told it should not expect charges to be filed against it in the investigation; I think the settlement with Starwood should push that investigation to a close and will probably result in no action since Starwood seems to be satisfied with the results.

There was really no doubt in my mind that the case would end this way – it was just a matter of how long it would be until Hilton could develop a boutique/lifestyle brand, and how much Hilton would have to pay Starwood. I still wonder what it has done to the careers of Amar Lavlani and Ross Klein.. Are they ever to be employed by a major corporation again? It’s a sad story because I knew both of them, and have met them a few times, so I’m still a little suprised that they did what they did – but I think it comes down to this: money talks.

andrew@alconic-inc.com

New York Magazine scored a great interview with him, and ended up reminding me that it was Barnett’s Extell that sold the building that currently houses the W Times Square to Starwood Hotels in 2001.

This is the same building, located on 47th St, behind the Roxy Deli where Robert Earl originally planned to open the first Planet Hollywood Hotel (back in 1997) which was to be managed by Sheraton, at the time known as ITT-Sheraton before being purchased by Starwood Hotels. (And everyone thought that Sheraton managing the Planet Hollywood Las Vegas was out of left field).

The project languished without even getting off the ground for a number of years, with Gary Barnett finally taking ownership of the property, and building it out. Then right as it was about to open, the events of 9/11 occurred, the project was once again put on hold because travel essentially dropped. Gary Barnett ended up having Barry Sternlicht’s Starwood Hotels purchase the property and open it as one of W Hotel’s flagship properties.  The W Times Square is still owned by Starwood Hotels to this day.

I knew about this years ago and have been looking for information on it since then. Finally! My questions have been answered.

andrew@alconic-inc.com

One of the 2 towers that make up the Cosmopolitan Las Vegas

It’s been a very interesting journey for the Cosmopolitan – starting back in 2005 with the announcement that it would be managed by Hyatt Hotels, then after the original foreclosure and take over by Deutsche Bank, it was heavily rumored to be turned into a W Hotel.. Then after Ross Klein left Starwood to join Hilton Hotels – it was an open secret that the Cosmopolitan would end up being one of the first Denizen hotels, and well – we all know where that went.

It’s a huge win for Marriott, a big loss for Hilton – who was originally hoping to come into the marketplace swinging with the Cosmopolitan as a Flagship Denizen property, and Starwood still doesn’t have a presence in Vegas for its W Hotel brand, a location which would be perfect for the W.

This is a huge step for Marriott because it gives them a huge appearance front and center on the Vegas Strip – up until now Marriott had no boutique or architecturally significant properties in Vegas. It’s also going to assure that the property will be managed by an experienced group and will be frequented by many people who are just looking for a place to utilize their Marriott Rewards points.

I’m really curious to see how the Ritz-Carlton tie in will appear, I have a feeling that one of the two towers may be catered toward Ritz-Carlton guests, be a bit more high end, but we’ll see how that ends up playing out as time goes on.

andrew@alconic-inc.com

Under Starwood’s ownership Bliss did create the “Remede Spa” line – a high end line of spa products, and a high end spa that are found in some St Regis Hotels, but oddly enough earlier this year Starwood announced a new brand “Necter” created along with a “spa branding and management company”. It begged the question – why not use your in-house spa brand to create and market a new product as they did with Remede?

Once I heard that, I had a feeling something was up for the Bliss brand in Starwood’s portfolio. Bliss was never really integrated into Starwood – almost like a red-headed stepchild – because it always had its own management team and was run as a separate division, separate even from W Hotels which was intended to be it’s “parent”.

About a year ago I wrote a story about the possibility that Starwood was beginning to increase the promotion of their Bliss Spa brand by including the logo in corporate materials, but that increased promotion never seemed to get beyond corporate documents – nothing seemed to be added to the Starwood Hotels site, and there were never any cross marketing campaigns except on WHotels.com

Fortunately for those Bliss lovers, the Bliss & Remede brands will stay exclusive to W Hotels & St Regis hotels exclusively (and probably aloft too), but whats interesting is how the brand will just become another commodity within Steiner Leisure.

Steiner Leisure is one of those companies that a lot of people have had an experience with – but dont even realize it. For example, Steiner operates the spas on 16 cruise lines, encompasing over 125 cruise ships, owns the Elemis line (found in local spas around the country) and operates many many resort spas around the world.

The divestiture of Bliss was a great move for Starwood, especially since it never made complete sense for Starwood to purchase the brand to start with. Starwood can now focus on the hospitality industry more and leave the associated businesses to companies that focus on that particular business – such as how Gerber Bars operates most of the bars at the W Hotels. The purchase of Bliss by Steiner will give them a high-profile brand, the ability to expand the brand by opening  shops and spas in stand-alone retail locations unaffiliated with hotels (something Starwood never seemed eager to do).

My only question is what will happen to the Bliss office/staff since they now share an office with Starwood’s Luxury Brand Group.

andrew@alconic-inc.com

Here’s why:

The reason I don’t see the Cosmopolitan being branded as any Hilton Family hotel is quite simply because of Hilton’s current lawsuit with Starwood Hotels. One of the main points of the Starwood/Hilton lawsuit was the accusation that in the beginning of 2008, two newly hired Hilton employees, (Ross Klein & Amar Lalvani – formerly of Starwood Hotels) stole confidential documents and knowledge of projects that Starwood was actively developing (among other things).

Around that same time Starwood Hotels was apparently working on a deal to put a W Hotel & St Regis hotel in the Cosmopolitan; but once Klein & Lalvani moved to Hilton, there was complete silence on any possible deal with Starwood and the Cosmopolitan.

It wasn’t until earlier this year that Deutsche Bank was said to be working on a deal in which the Cosmopolitan would be managed by Hilton; although it wasnt ever officially announced, it was pretty common knowledge in the industry that the Cosmopolitan would end up being one of Hilton’s first Denizen Hotels.

I can’t see how Starwood would enable the courts to let Hilton even come near the Cosmopolitan – especially since the individuals who were privy to the W & Cosmopolitan deal went to Hilton and suddenly, the Cosmopolitan was going with Hilton.

I could be wrong – but I think its safe to assume that the news bit that the LVRJ is relying on is old information which may have been correct back in March of this year, but is no longer correct since the Starwood/Hilton lawsuit. I still firmly believe that if one of the major lodging companies are to brand and manage the Cosmopolitan – it will be Starwood with the W Hotel, and perhaps even a St Regis or Le Meridien.

In other good Cosmopolitan news: the joint finally has a General Manager, and has reiterated their planned opening date of late 2010 – still a year away, but since the project has been under continaul construction throuhgout hte past few years, I see that as a realistic date.

I wouldn’t be surprised to see the Cosmopolitan making a big announcement either right before MGM CityCenter opens, or in the beginning of 2010 – after the CityCenter hoopla dies down, because the end of this year will be totally dominated by CityCenter news/announcements/reviews, etc.

andrew@alconic-inc.com

Back in April, Starwood Hotels sued Hilton Hotels, and two of their employees – Ross Klein and Amar Lalvani for taking trade secrets and confidential information to build the Denizen hotel brand. At the time Hilton came back with their standard boiler plate response to a lawsuit “we feel this suit has no merit and will vigorously defend it” – but I think it was clear that they really had no leg to stand on.

Since that lawsuit was filed Hilton was ordered to stop all further development or marketing of the Denizen brand and they put alot of the employees within Hilton’s Prestige Portfolio’s development team on paid administrative leave – the same employees who had worked at Starwood’s Luxury Brands Group under Ross Klein.

Hilton has pretty much removed all references to Denizen from their websites and press releases and taken down the Denizen Hotels website – but no official word from Hilton or Starwood has come out about Denizens actual fate.

For a comparison – Hilton’s other recently announced brand – Home2Suites has already been integrated into the brand bar at the bottom of all Hilton Family web pages.

Most likely Starwood & Hilton will do an out-of-court settlement which will force Hilton to scrap anything having to do with the Denizen brand, start from scratch on a new boutique brand, and fire the employees who used to work at Starwood then moved over to Hilton. The alternative is a long and protracted legal battle that Starwood is almost definitely going to win.

Hilton was dumb, they put themselves in a precarious position and because of that will end up having a black-eye within the industry and end up even further behind in creating a boutique hotel brand. At this point Marriott’s Edition is looking better than Denizen, even though Denizen apparently had more contracts under negotiation and more work done Edition did in less time. Then again – Denizen’s development was sped up by the use of Starwood’s confidential documents.

It also leaves to question the status of the projects which were expected to include a Denizen – first and foremost, the Cosmopolitan Resort & Casino in Vegas. That project has seen more high-profile problems and issues than anything I’ve ever seen before. I suspect yet another delay in the project and yet another hotel brand (perhaps W?!).

My friends over at HotelChatter have also been following the Denizen saga, so you might want to read up on it over there as well.

andrew@alconic-inc.com

MGM Mirage MX Logo

The first is MX which will be MGM Mirage’s lifestyle hotel brand.

Think: MGM Mirage’s version of the W.

There is very little information about the MX brand, but one of the most forthcoming sources is MMH’s website where a brochure can be downloaded that includes the logo and a few paragraphs on the brand. I’ve cut and pasted the description of the brand below

MX will be the contemporary, design forward, urban-chic hotel of the new century with a young,
edgy and energetic vibe. Created to stimulate the imagination and push the boundaries of art
and design, MX provides an experience filled with novelty, discovery and surprise. In doing so,
MX becomes the clear choice for a distinct and powerful crowd of progressive thinkers. The
bold and edgy surroundings challenge the senses and invite guests to explore the sensory
playground of MX.
MX will delight culturally savvy visitors with a five-star experience built on thought-provoking
design and studded with awe-inspiring details. From the spa to the restaurant to the bar, each
space offers a new twist to discover. Guests are kept in constant exploration, which is in itself
exciting, fulfilling and unique.
To complete the experience, MX is staffed by extroverted and knowledgeable people who
are able to make relevant suggestions and contribute to each guest’s quest for discovery and
conversational content. They achieve this while simultaneously delivering flawless service
and savoir-faire. Those who stay at MX may leave with the impression that they have finally
seen it all, but when they return a few months later, they quickly find that a whole new
experience awaits.

The text above isn’t all marketing speak using big words (very odd in the hotel industry), as it sets some definite goals they have for the brand, and wow – they have set the bar pretty high.

There are three points that stick out to me in the description of the brand: Extroverted employees, different experience upon return, focus on the senses.

Extroverted Employees

W Hotels is famous for having unique employees who believe in the brand and are a major part of the brand, so much that their vocabulary focuses on words that start with “W”.  The Industry Standard is also unique by having some of their employees dress as nerds (in my opinion, others would have another word for it).

But MGM is looking for extroverted people to work here, (for those who need a refresher, the definition for extroverted is: “Marked by interest in and behavior directed toward others or the environment as opposed to or to the exclusion of self; gregarious or outgoing”)

Maybe I’m reading into it a little too much – as every hotel really would like all of their employees to be extroverted, I mean who would want an introverted front desk employee, or bellhop? But MGM is taking it to a new level by actually stating that front and center. It also leaves those who are introverted on the sidelines – should they even consider applying? Not everyone is an extrovert, and that’s ok – not everyone has a Type-A personality. I’m curious to see how that will pan out once something comes of the MX brand.

Different Experiences Upon Return

This point is interesting because from the way its written, it seems as though every few months the hotel will go through a top down renovation – new colors, furniture, smells, artwork, art, etc. Is that even possible? How cost effective would that be? W Hotels once again is the example I’m going to use, every few years each W seems to go through a complete renovation of the rooms and public areas, W Chicago City Center was one, W New York, & Times Square are some examples which just completed their renovations in the last year – but even W only does it every few years, and I’m sure that cost plays a big part in that.

I’m really interested to see what these “experiences” will be, and how will they will integrate into the whole brand and the physical space that the hotel is built in. If MGM is somehow able to successfully and cost effectively change the hotel a few times a year without the hotel’s price point being sky high it’s a hotel industry game changer.

Focus on the Senses

Reading the description of MX reminded me of LeMeridien’s focus on LM100, which was their way of becoming a cultural hotel, having artwork, sculptures, food, music – everything that touches the senses come alive inside the hotel. It seems as though MGM Mirage is trying to do the same for their MX brand, which is great, but I’m curious as to what the marketing speak of “surprises” will entail. Will butlers pop out of the walls with champagne? Will you walk in the room and wonder what music will be playing this time?

Lastly, is it any coincidence that the MX logo (above) slightly resembles a lion, which is MGM Grand’s famous emblem?

Which is once again ironic, because that’s the the name of their second brand..

The second brand is “Emblem”.

I’ve found even less information about Emblem – the last mention of it occurred in May 08 in a blog post from Hotels Magazine, where it was mentioned as an “ultra-luxury” brand. I haven’t seen anything else about it, so its possible that it was canceled due to the economy – its worth mentioning that MGM already has an ultra luxury brand – “The Mansion” which is a part of the MGM Grand in Las Vegas, it has its own private entrance and is completely separate from the main building. Perhaps this was to be a re-branding of The Mansion?

Conclusion

It’s interesting that MGM Mirage is putting so much into their MGM Mirage Hospitality division by coming up with new hotel brands that they can open throughout the world that don’t have a casino component like all of MGM’s current properties do (or at least are closely affiliated with). Once the economy and travel picks up again – MGM Mirage may be a viable competitor in the non-gaming lodging industry, although it will take years for them to get to the scale of any of the majors.

andrew@alconic-inc.com

Not much has been said about these new positions – the information was gleaned from an interview that Derek Gale, a writer from Hotels Magazine had with W’s Vice President of Brand Management.

W’s marketing focus will move even further toward events, with more fashion programming (like W’s backstage lounge at New York’s Fashion Week) and music release parties in cities across the globe.

The fact that they are willing to hire someone to be a music curator and a fashion director – for a hotel brand – speaks volumes about the direction Starwood sees W going in. It’s similar to what Starwood did with the LeMeridien brand when they started LM100, and its no coincidence that W’s new boss is Eva Ziegler, whose previous position was brand director at LeMeridien.

Alot of people may ridicule the W brand because of their attempt to be trendy and as well as their “commercialization” of the boutique hotel concept, but no matter what anyone says – they are very successful at it. Unlike some hotel brands that attempt to open hundreds of hotels a year, W sticks to opening just enough hotels that its still able to capture the feeling and the essence of W.

Some boutique hotel companies may do the boutique feel a little better – Thompson Hotels is the first that comes to mind, but their individual hotels are not part of one name-brand. Indigo Hotels is another brand that claims it’s a boutique and tries to give the boutique look and feel – but the segment the brand is in, and the acceptable standards that the hotel has would never reflect a true boutique brand. Not to say that Hotel Indigo is not a quality brand – it is, but it doesnt have the amenities that W would have.

For the majors, Starwood, Marriott, Hilton, Choice, Intercontinental, Wyndham - Starwood is still the only hotel company that has a real boutique hotel product in the market today. Hilton’s Denizen seems DOA, Marriott’s Edition is taking so long to get off the ground I’m wondering if it’s going through some major modifications, Wyndham & Choice don’t even look to be interested in a high-end brand, and Intercontinental has Hotel Indigo.

It’s going to take a lot of catching up to do for any new or existing hotel brand to eclipse the W as hotel brand that’s easy to replicate (relatively speaking of course) and has so many tie ins and marketing kicks that one-up W in the marketplace. The experience and the knowledge that Starwood has on W is tremendous – and a perfect example of that is the value placed on it in the pending Starwood/Hilton lawsuit.

andrew@alconic-inc.com

Ever since the beginning of 2008 anything that could happen to the Cosmo seems to have happened, and whenever it looks like there is a light at the end of the tunnel, something else seems to pop up and cause more problems for the project and those who have placed deposits on it.

Now the latest screw in the cog is related to Starwood & Hilton’s lawsuit over the Denizen brand. Since the Denizen brand seems to be the hotel that is going into the Cosmopolitan, and according to the court order from earlier today all development on the Denizen brand and properties are to suspended for at least 90 days. Bad news for the developers, bad news for the deposit holders and just bad news for Las Vegas as well – another Strip property whose future is in doubt.

What really interests me though is the connection between Ross Klein, Amar Lavlani and the sudden switch from the Cosmopolitan being a W/St Regis to a Hilton property:

Last year there was a WSJ article which said that a deal between was essentially completed between W Hotels/Starwood & the developers of the Cosmopolitan which called for one of the Cosmo towers to be a St Regis, and one of the towers to be a W Hotel. A deal like this made complete sense – Starwood was looking for a way to get their W hotel brand launched in Las Vegas, and it was a great way to also bring the St Regis brand to Las Vegas since the Cosmopolitan was going to be made up of two towers – one which could be branded as one hotel, one branded as the other.

A few months after that story came out, Ross Klein & Amar Lavlani resigned from Starwood and took new positions at Hilton; from that point on any word of W/St Regis going into the Cosmopolitan all but stopped.

Earlier this year there was a surprise announcement that Hilton, and not Starwood would be taking over the management and branding of the Cosmopolitan Resort, including a complete redesign of the interiors, shortly afterwards Hilton announced their Denizen brand, and it was assumed and reported that the Cosmopolitan was going to be one of the first Denizens, although nothing official was reported by either Hilton or the Cosmo’s developers.

In the lawsuit Starwood filed against Hilton, Starwood alleges that Hilton/Klein/Lavlani took confidential documents which had information on how Starwood structured new property deals and used that to go to Starwood’s developers to “steal” the property so that it could be opened as a Hilton branded property..

Hmm.. Are you thinking what I’m thinking? Who knows what will happen to the property now – will it have to go through another complete design process? Will W Hotels end up opening there anyway?

andrew@alconic-inc.com

The big news earlier this week were reports that Deutsche Bank was going to exchange the Cosmopolitan property with MGMMirage, and in return Deutsche would receive an equity interest in the MGM City Center development. By the end of the week it looks as though talks broke down and Deutche Bank wasn’t able to come to agreement about the transaction – but it would be a great combination of assets. Deutsche Bank would finally be happy with an investment that makes sense and combining CityCenter with the Cosmopolitan would add to the value of the Cosmopolitan and make them all one property – which I think they should have been from the start. Unfortunately, some of the marketing aspects of CityCenter will not be realized with the Cosmopolitan – for example the LEED Certification and the sharing of services between CityCenter and Cosmo.

MGM’s credit situation is a little scary, they’ve had to borrow from their credit line recently, and the overall economy – especially in Las Vegas is not getting any better. I’m not sure what this means for the future of MGM, besides the fact that CityCenter will still be completed, but the company may look different in a year or two – probably smaller through the sale of additional properties.

The next big story about the Cosmopolitan is made up of two seperate, but probably related events. The first is reports have come out saying that Deutsche Bank is “displeased” with the interior decor of the Cosmopolitan, thus are redoing the interior of the buildings, laying off alot of construction workers. From the Las Vegas Sun, this would be the third redesign of the Cosmo’s interior, the new designs are supposed to be released this coming week..

Which brings me to another event; who will manage and brand the hotel component of the Cosmopolitan? Hyatt has been out for months, and it was widely expected that Starwood would be taking over, they have a good relationship with the Related Co’s which is now in charge of finishing the construction, and Starwood is probably dying for a W outpost on the Strip since the W Las Vegas was canceled a few years back. I received a comment on my blog about Hilton taking over the management, and then VegasTodayandTomorrow.com has also reported that Hilton is going to be doing the management, predicting that it will be a Conrad hotel..

But I differ.

Am I the only one who has noticed the timing of all these announcements suddenly?

1. Deutsche Bank is ordering a redo the interiors which are supposedly being finalized this week (what does a bank really know about interiors of a resort?)  – plus it’s odd the design changes are being attributed to Deutsche Bank and not Related Co’s who is in charge of the construction.
2. Hilton signing for the management of the hotel.
3. March 10th – the announcement of Hilton’s Project Global 21.

I have a feeling that the Cosmopolitan will be one of the first locations of Hilton’s Project Global 21 hotel brand. It makes sense, plus all talk of the W at the Cosmopolitan stopped when Ross Klein went from Starwood to Hilton last year

I could be completely off – but my deductive reasoning says otherwise.

andrew@alconic-inc.com