UNITE HERE sent letters to dozens of owners of Hilton franchises in university towns, urging them to evaluate whether Hilton is the brand that provides the most value for their properties going forward, in light of Hilton’s recent acquisition of the Graduate Hotels brand.

Hilton (NYSE: HLT) acquired the Graduate Hotels brand from real estate investment firm AJ Capital Partners in March 2024, and signed long-term franchise agreements with all existing and signed pipeline Graduate hotels. UNITE HERE’s letter, sent to over 80 owners of Hilton-branded hotels in university towns or otherwise near Graduate Hotels properties, warns owners:

“You may have chosen Hilton as your franchise partner, and paid Hilton’s hefty franchise fee and adhered to strict brand standards, in order to access the pool of loyal customers that comes with the Hilton Honors program. Your participation in Hilton Honors has served as a competitive advantage. However, that advantage is diminished now that you have a new competitor for the same pool of Hilton-loyal customers with the nearby Graduate hotel.”

The letter also explains that earlier this year, Tishman Realty, the then-owners of the Sheraton Grand Chicago, exercised an option to force Marriott to buy that hotel. Marriott purchased the hotel and the land underneath for $500 million. According to Hotel News Now, “As of last June (2023), the property’s estimated value was $270.5 million, according to a Morningstar DBRS loan report … That report’s estimate of the current value was far below the $516 million combined value of the land and the leasehold interest from 2017 appraisals when the loans were issued.”

Marriott was forced to buy the hotel at a price higher than the property’s valuation as part of the settlement of a 2017 lawsuit filed by affiliates of Tishman Realty regarding Marriott’s purchase of Starwood. The Tishman affiliates argued that the Marriott/Starwood merger violated the management agreement’s area of protection clause, and the right to force a sale to Marriott was part of the final settlement.

The letter concludes, “In this era of consolidation, brand proliferation, and tightening brand standards that put pressure on margins, we encourage you to carefully consider whether Hilton is the brand that provides the most value for your properties going forward. You can also consider your rights under your franchise agreement.”

View source version on businesswire.com: https://www.businesswire.com/news/home/20241007543865/en/