Times Square hotel operators sued over underperformance

(Crowne Plaza New York)

Vornado Realty Trust, a real estate investment trust focused on New York City and Washington, D.C., is suing one of its New York hotel operators over its poor performance.

Holiday Hospitality, a franchisor and licensor of hotels owned by InterContinental Hotels Group, is the target of Vornado’s $30-million lawsuit. Vornado claims Holiday Hospitality failed to properly run the Crowne Plaza Times Square, citing failed marketing efforts and bad public perception. The suit claims this “alarming underperformance” is a breach of Holiday Hospitality’s licensing agreement with Vornado.

“Rather than promoting and supporting its owner’s hotel, the Crowne Plaza brand is an albatross around the neck of the business — dragging with it the property owner’s half-billion dollar investment and its profitability,” Vornado’s lawyers wrote in the suit. “Because owners recognize the detriment of affiliation with the Crowne Plaza brand, there is an anemic pipeline of Crowne Plaza branded hotels in the United States.”

Crowne Plaza New York

Problems with the hotel date back to May, when Vornado claimed Holiday had breached its license agreement with the realty trust regarding its Crowne Plaza at 1601 Broadway in New York. Vornado set a 40-day deadline to address problems at the hotel, according to the lawsuit. The realty trust chose to terminate its licensing agreement with Holiday after it claims the management company failed to address requested changes tot he hotel, effective Aug. 8.

The suit also claims that while Vornado bought out its joint venture partner in the Crowne Plaza for $39 million, increasing its ownership stake in the hotel from 11 to 33 percent over a year ago, Holiday spent roughly $4 million on advertising the property over the past six years.

In a statement, a spokesperson for IHG said the company does not comment on pending litigation, though it intends to “enforce our rights under the license agreement we have with the owner.”