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HotelChatter Flashback / Denizen Hotels / Hilton Hotels / Starwood Hotels / Hotel Lawsuits / → All Tags
It's time for a walk down memory lane with a HotelChatter flashback!
What we didn't know then is that the story of Denizen would end, not with a glamorous hotel opening in an urban market somewhere, but rather in federal court with Hilton being forced to pay Starwood Hotels $75 million for stealing ideas from their rival hotel company, largely through Hilton's hiring of Ross Klein, the so-called godfather of Starwood's W Hotels. Hilton also had to agree to "certain business restrictions" as well as agree not to buy or franchise any Starwood Lifestyle Brand hotel that Starwood operates nor hire anyone from Starwood for two years.
But guess what? The two years are up! And we've heard whispers that Denizen is being resurrected, although with a completely different name and look. Even though we hated Denizen when it was first introduced we can't wait to see what the new incarnation will look like.
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Merry Christmas to all! Your present from Santy Claus is never hearing about the Hilton-Starwood Lawsuit ever again!
That's because today Hilton has agreed to settle with Starwood over the failed Denizen brand plans which were, as Starwood alleges, "infected" with Starwood trade secrets. Hilton had hired several key employees from Starwood, including W Hotels' Ross Klein, who took with them proprietary Starwood information with which to create Denizen.
The total cost for Hilton to settle? $75 million which is reportedly the monetary payment they are now going to make to Starwood. Not only is Hilton $75 mil poorer but now Denizen is totally dead and never going to see the light of day (we say, Good! That hotel brand was dizzyingly confusing.)
Additionally, Hilton has agreed to "certain business restrictions" for two years. We take that to mean Hilton is not going to be rolling out any new boutique hotel brands until 2013.
UPDATE: Starwood's Chief Administrative Officer has a statement on the new court filings below.
The drama continues in the Starwood-Hilton lawsuit with Starwood filing new allegations yesterday saying that higher-up execs at Hilton knew full well that its employees were stealing Starwood's trade secrets and that two other Hilton brands--Waldorf-Astoria Collecion and Conrad Hotels--are "infected." And they don't mean with swine flu.
USA Today reports on the new filings which may have been prompted by the discovery of a whistleblower:
According to Starwood's filing, the whistleblower told [Hilton CEO Christopher] Nassetta that "numerous manuals, detailed plans, budgets, marketing systems, building specifications and other proprietary documents from Starwood were brought to Hilton by Mr. [Ross] Klein. Mr. Klein put some of these highly proprietary documents on Hilton's internal computer server, and instructed Hilton personnel to use these proprietary Starwood documents as a detailed plan for them to follow to develop and modify Hilton's luxury and lifestyle brands."
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The Wall Street Journal reported this morning that Hilton Hotels and its executives accused of stealing proprietary W Hotel information to create their now dead-in-the-water hotel brand Denizen Hotels, could face criminal charges.
The grand jury is part of a six-month-old Justice Department probe into allegations that Hilton, which is owned by private-equity firm Blackstone Group, used trade secrets taken by former Starwood executives, who defected to Hilton last year, to develop its own luxury brand to compete with Starwood's successful W chain.
About 30 Hilton employees and executives have either been fired or placed on leave. Ross Klein, the former president of Starwood Hotels who defected to Hilton and was in charge of the Denizen development, was initially place on paid leave with Hilton. However, he was recently replaced by John Vanderslice as Hotels magazine reported last month.
But there is a chance that even if Hilton as a corporation is not criminally charged, the individual employees could be prosecuted themselves.
Oh Denizen. You seem to be gone your website is dead, there's been nothing but quiet since development was suspended, which is probably the wise (and law-abiding!) thing to do but we just like to do little updates now and then just to remind the world that, though you may be gone-ish, we haven't forgotten you.
And neither has Hilton, we suppose. While we assume legal proceedings and negotiations and possible out-of-court (and outta the press) settlements are underway, we noticed the brand is absent from the Hilton Family website but not, it seems, absent from some of the press releases we've seen going around lately (like this one), listed among the rest of Hilton's babies ("The company owns, manages or franchises some of the best known and highly regarded hotel brands including Hilton, Conrad Hotels & Resorts, Denizen Hotels, Doubletree..." etc, etc.) Interesting, no? Well, no. Not really.
The truth is, we just don't really know what's going on and the Hilton peeps have done a damn good job of keeping the press away from what we assume is a whole lot of interesting action going on very quietly between Denizen and Starwood. We're sticking with our guess that the thing's totally dead in the water, but like the sorta-mean frenemy who will always remind you of the time you wet your pants in 3rd grade we are going to continue to bring it up from time to time so nobody forgets that we're watching and waiting for the outcome of this.
Or someone could just, like, tip us off.
Big surprise here: the Washington Post did a big ol' rundown of the Starwood-Hilton legal battle over Denizen and there is no evidence that the Denizen brand is anything but, well, dead. If you're just tuning in, the Cliffs Notes go like this: a couple Starwood employees who helped develop the W Hotels brand left S-wood to develop a similar brand for Hilton called Denizen, and those execs allegedly stole a bunch of W trade secrets in the process now Starwood is suing Hilton for corporate espionage and it's a huge mess.
Now, several weeks after the media frenzy and initial wave of tongue-wagging that surrounded the scandal when the news broke, the smoke has cleared a little bit and Washington Post was able to sort of tell the story without any crazy legal terms from top to bottom.
Some interesting tidbits: Ross Klein's (the former Starwood-turned-Hilton-exec who is sort of at the forefront of all this) attorney, said "Starwood's complaint is in large part an exaggerated and one-sided recitation of the facts." Apparenly, Klein's thinkin' that once all the facts are out on the table, it will look like he "acted in good faith." Okay.
Unsurprisingly, reports are coming in that Hilton is doing what they can to settle their dispute (otherwise known as The Great Denizen Disaster) with Starwood out of court because, obviously, they're trying to keep the damage to their already-pretty-soiled reputation to a minimum.
In more official words, Travel Daily News printed:
Hilton Hotels is seeking a negotiated settlement in its corporate espionage case with Starwood rather than seeing the legal spat battle between two of the industry’s fiercest competitors aired in public, thereby avoiding further humiliation of its botched entry into the lifestyle hotel sector.
Uh, in cased you missed all these shenanigans (watch the drama unfold here): Starwood filed a complaint in federal court in New York claiming two former Starwood executives hired by Hilton Ross Klein and Amar Lalvani had stolen information about the W hotel brand to develop Hilton's Denizen luxury-lifestyle hotel concept. It was a pretty clear case of corporate espionage, and last we heard, all development of Denizen was suspended until things could get moving with this legal battle.
Um, just a guess, but this could mean Denizen is probably dunzo, right? Maybe the biggest priorities for Hilton are just minimizing and repairing the damage to the company's reputation and moving on?
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We reported earlier this week that Hilton had halted development of Denizen (per a Hilton press release), but now Starwood is speaking out (i.e. issuing their own press release) saying that a judge has actually entered a Preliminary Injunction with Hilton, Mr. Klein and Mr. Lalvani the Starwood-turned-Hilton employees who allegedly stole the Starwood documents and trade secrets to develop Denizen enjoining them from:
· Developing further the Denizen Hotels brand. This requires that all internal and external design, branding, development, promotion, programming, staffing and marketing of the Denizen Hotels brand cease.
· Engaging in any discussions or negotiations with prospective owners, developers and/or franchisees relating to the Denizen Hotels brand.
· Using, directly or indirectly, in any way the documents and electronic information obtained from Starwood (the "Starwood Information") or any information contained in or derived from the Starwood Information.
Ugh. Now, a question: if you were a prospective owner, developer, or franchisee, wouldn't you be inclined to, oh, we don't know...talk to the folks over at Edition about perhaps making a deal? We would.
We hadn't heard much from the Hilton or Starwood camps since the news broke last week that Starwood was suing Hilton for the alleged theft of "trade secrets" that Hilton used to develop their recently-announced Denizen Hotels brand.
But today, Hilton speaks: the corporation issued a press release acknowledging that they've received a federal grand jury subpoena "requesting documents relating to Hilton's employment of former employees of Starwood Hotels & Resorts Worldwide, Inc. and materials which Hilton returned to Starwood in February of 2009."
These "employees," of course, are Ross Klein and Amar Lalvani two ex-Starwood employees who migrated over to Hilton, allegedly taking sensitive information with them illegally. According to the press release, Klein, Lalvani and "their luxury and lifestyle team" have all been placed on paid administrative leave "pending Hilton's review of the situation."
And the biggie update: "At this time, further development of the Denizen Hotels brand has been temporarily suspended." Oh noes. Probably a good idea for Hilton to take a step back and clean up this mess but could this mean Denizen will end up dead in the water?
The hotel world is in a tizzy today about the lawsuit that Starwood Hotels has filed against Hilton Hotels, Ross Klein, Amar Lalvani and their just-announced new hotel brand Denizen Hotels. Already folks are dividing themselves into two camps: Team Starwood and Team Denizen. We expect t-shirts from Cafe Press to be ready within the hour.
In reading today's article from the Wall Street Journal, which broke the news online last night, we get the rundown of all Starwood's major complaints which allege that Klein and Lalvani stole trade secrets, brand profiles and even other Starwood employees.
The allegations are shocking and scandalous and while we do believe that everyone is innocent until proven guilty, we can't help but wonder what would have happened if Hilton Hotels had just used the rumored name The Quinn in the first place.
That's because Starwood is alleging that the name Denizen Hotels actually comes from a concept called "zen den" which was to be implemented in W Hotels. Zinger. Ouch.
Now, hearing that the brand Denizen may have come from "zen den", it makes the name seem less bizarre and a little more sensible than "denizen of the world" which is what Denizen Hotels have been touting since its announcement. But stolen goods are never cool. What about just using the name The Quinn instead? We liked that better!
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When Ross Klein left Starwood for Hilton, eyebrows were raised and when Hilton's new luxury brand, Denizen, was launched in March, we got a peek at what Klein had been cooking up at his new offices all that time: a sleek, chic boutique concept aimed at the "globally conscious modern traveler." You know, a new brand meant to compete with the Thompsons, Morgans and W's of the world.
And guess who wasn't so happy about that? W.
And guess what Starwood's doing about it? Suing.
According to a Bloomberg report, Starwood filed a complaint in federal court in New York claiming two former Starwood executives hired by Hilton Ross Klein and Amar Lalvani stole information about the W hotel brand to develop the Denizen concept.
It's been a while since we checked in with the new boutique hotel brand from Hilton, Denizen Hotels. But fortunately, they have made it easier for us to keep up with them by Twittering, Facebooking and now YouTubing anything new from the DH HQ.
This here is the latest video posted to their profile and it involves some of the cool, new agey, techno-ish lobby music. (Does anyone have an actual name for this kind of music favored amongst boutique hotels?)
The video kicks off with a slogan, "I'm a citizen of the world; I'm a Denizen of the world." Then it moves you over fast-changing cityscapes to the Denizen logo which some HC readers are not in love with. More cityscapes. Butterflies! Another slogan: "I am a denizen that never sleeps." Um, ok? But aren't you a hotel brand? Where people are supposed to go to sleep?