Hilton’s Hands Slapped in Starwood Settlement

Ed Watkins, Editor-In-Chief of Lodging Hospitality, gets it right (as usual).

Starwood accused Hilton of stealing documents related to the development of the W brand.

As many analysts believed, Starwood’s sensational lawsuit against Hilton Hotels won’t make it to a courtroom. In a decision filed in federal court yesterday, the two sides agreed to a settlement of the nearly two-year-old suit in which Starwood accused Hilton of stealing trade secrets to launch the since-scuttled Denizen lifestyle hotel brand.

While most terms of the settlement weren’t announced, Hilton will remain under scrutiny by the court to prevent a reoccurrence of the alleged actions.  Hilton said it consented to an injunction that includes “certain business restrictions for a period of two years,” which according to some press reports precludes creating a lifestyle or branded boutique brand during that time.  Starwood further announced that the settlement requires Hilton to be subject to monitors appointed by the court “to assure the conduct that occurred does not occur again.” And finally, and perhaps most ominously, the court filing indicated a federal grand jury will continue to look into whether Hilton and some of its former executives should face criminal charges.

Hilton CEO Chris Nassetta was humble in commenting on the settlement, saying, “Hilton Worldwide regrets the circumstances surrounding the dispute with Starwood Hotels and Resorts Worldwide and is pleased to bring an end to this prolonged litigation.” [via Lodging Hospitality, Hilton's Hands Get Slapped in Starwood]

It seems to me that Hilton Worldwide will suffer long-lasting, unpleasant consequences.  Since Hilton will remain under court oversight that includes “certain business restrictions for a period of two years”, they may well be precluded from making important brand improvements.

About the author: Stanley Turkel, MHS, ISHC operates his hotel consulting office as a sole practitioner specializing in franchising issues, asset management and litigation support services. Turkel’s clients are hotel owners and franchisees, investors and lending institutions. Turkel serves on the Board of Advisors and lectures at the NYU Tisch Center for Hospitality, Tourism and Sports Management. My new book is available at reduced rates. Vist GreatAmericaHoteliers.com.


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