Marriott Sues Hotel for Becoming Migrant Shelter

Marriott has Interesting lawsuit filed Against the owners of what was supposed to be a Marriott hotel, after the owners decided instead to turn the property into a shelter for migrants.

Aloft & Element Hotel Near New York’s JFK Airport Turns Into Migrant Shelter

Marriott has filed a $2.6 million lawsuit against the owners of a New York City hotel in the borough of Queens near John F. Kennedy International Airport. The 283-room hotel was supposed to open to the public in November 2023 as a dual-branded hotel, Aloft and Element.

There aren’t many airport hotels near JFK, so it was a significant addition to Marriott’s portfolio. The deal was signed in 2015, so this property had been long anticipated for the Marriott brand, as there were construction delays, and then the pandemic happened.

But in August 2023, a few months before the planned opening, the hotel owners appeared to have changed their minds. The decision was made to turn the property into a migrant shelter, thanks to a “lucrative” agreement. The hotel owners did not even remove Marriott signs and branding at first, or pay the franchise fee, in another violation of the agreement with Marriott.

Marriott reportedly tried to reach an agreement with the hotel owners that would see Marriott continue to receive some fees for the arrangement, but the owners apparently rejected the agreement, leading to this lawsuit. They apparently thought they could simply cancel their agreement with Marriott altogether.

In recent years, we have seen dozens of hotels in New York City stop accepting 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 about half of the hotels around JFK Airport are shelters.

These accommodation contracts have become lucrative for many property owners, especially since the New York City hotel market has been very slow to recover.

The city reportedly pays between $55 and $385 per night to use these rooms as shelters, so you can quickly see how this becomes a lucrative source of revenue for hoteliers, especially when you consider the guaranteed and consistent occupancy that hotels can achieve through this agreement.

The property’s owners defended themselves, saying it was “not economically viable” to operate it as a hotel, given the “poor state of the economy and the ongoing slowdown in the hospitality industry.”

Marriott seems to be right here, doesn’t he?

I don’t write about this because I’m trying to get into a political debate, but I find the situation interesting. I’m not a lawyer, of course, but it seems to me at first glance that Marriott has a case here.

Although the lawsuit contains some details about what the contract looked like when signed, it does not contain all the details. My illegal assumptions are:

• If the hotel is not open (whether due to the property being booked, market changes, or anything else), the hotel will not be responsible for paying the fees to Marriott.
• If the hotel decides at the last minute to change its brand and join another hotel group, the hotel will be liable for some kind of early termination fee, reflecting a breach of contract.
• However, this is a unique situation, as the property does not operate as a hotel, but has been transformed into a different business, operating as a shelter, which is a completely different concept.

When these contracts were signed, I assumed that the concept of turning the hotel into a sanctuary was not explicitly discussed, and perhaps not even on the radar. I think it’s fair to say that Marriott has a claim here, since the property was designed entirely to Marriott’s specifications, including the design.

Bottom line

Marriott is suing a potential franchisee for $2.6 million after the owners abandoned plans to build two hotels in Aloft and Element, turning it into a migrant shelter instead. Major hotel groups are embroiled in countless lawsuits with hotel owners, given the number of contract disputes.

But I imagine that a hotel owner’s decision to turn a Marriott into a shelter is one of the more unusual lawsuits, and one that may not be explicitly addressed in these contracts. I’m eager to see what the outcome of this case will be, or whether a private settlement can be reached.

What do you think about this lawsuit against Marriott?