In a letter last July, Marriott International, the largest hotel company in the world by number of rooms, outlined its intent to end its longtime relationship with AAHOA in response to the organization’s “12 Points of Fair Franchising,” which Marriott said ran counter to its business model and interests.
In the aftermath, AAHOA approached Marriott to disarm the volatile situation, but to no avail, according to AAHOA CEO Laura Lee Blake, who spoke exclusively to HOTELS about the stalemate.
At the heart of contention is Marriott’s reluctance to support AAHOA fair franchising points, first adopted in 1998 as a blueprint for designing and developing a “mutually beneficial franchise system.” The points cover entities such as liquidated damages, quality guarantees, vendor exclusivity, dispute resolution, franchise sales ethics and choice-of-law clauses.
In addition, Marriott found fault with AAHOA’s support of a New Jersey franchising bill, which seeks to tighten control over franchisors, including fully disclosing commissions/kickbacks; restricting vendor exclusivity; prohibiting fees not disclosed in FDDs; and proper compensation when franchisors sell loyalty points to guests. The bill is now before the Assembly Commerce and Economic Development Committee. AAHOA did not author the legislation, but said it has been transparent with Marriott and other hotel chains about the reasons for its support of the bill.
The letter sent from Marriott to AAHOA members stated that the hotel company “cannot support, either by endorsement and/or financially,” any organization that promotes policies that run counter to its own. “We believe quite strongly that the longstanding relationship between Marriott and AAHOA has proven to be mutually beneficial, and we are deeply saddened that AAHOA has chosen to pivot its stance on these key issues in a way that is decidedly anti-franchising and anti-Marriott,” the letter further stated.
Marriott did not respond to an email asking for comment.
“Promoting fair franchising has been the lifeblood of AAHOA and its members since 1998,” said Blake. “By creating and promoting fair standards, hotel owners can compete in a landscape that has largely been reshaped in recent years by the pandemic and the short-term, app-based home rental options.”
In response to the impasse between AAHOA and Marriott, Blake said that AAHOA had made overtures to Marriott, but they have up to now fallen on deaf ears. “AAHOA has always offered to freely discuss any pressing issues with our franchise partners, including Marriott, and will continue to do so.”
AAHOA added that Marriott’s intransigence appears to remain the same “even after numerous discussions and offers to work together to draft possible amendments to the New Jersey legislation, and to address the unfair policies and practices that are driving the bill.”
Blake also cited the initial letter Marriott sent to members announcing its intention to disengage from the organization, but Blake said she and AAHOA are still unclear on what Marriott finds fault in. “Marriott has never shared with us specifically which provisions in our 12 Points of Fair Franchising are allegedly anti-Marriott, nor which provisions of New Jersey’s A1958 fair franchising legislation are objectionable,” she said. “We have repeatedly informed Marriott that we are willing to hear their concerns and work toward a satisfactory resolution that protects hotel owners and benefits the entire industry, but without success.”
A fix to the contretemps does not appear to be coming anytime soon. One chance to assuage any ill-feeling was during an October meeting, when Marriott expressed its ongoing support for a Women and Young Professionals Development Day at the Marriott Headquarters in the future. The occasion allows AAHOA members to meet the leadership of Marriott and learn more about the organization and the prospects for existing and potential franchisees. The event never came to fruition.
“As for Marriott’s reluctance to reach a mutually beneficial compromise, only Marriott can answer that question,” Blake said.
Part of the worry over the clash between Marriott and AAHOA is the possibility that other franchise organizations that currently work with AAHOA could follow suit—or, conversely, fill the vacuum left by Marriott.
“The hotel industry faces continued challenges from the COVID-19 pandemic and recovery, as well as the popularity of unregulated or unlicensed short-term home rentals. The industry can confront these challenges most effectively when franchisors and franchisees work together,” Blake said. “Our members have productive and mutually beneficial relationships with many of the franchisors, including Marriott, and want no part in a divide-and-conquer strategy. We cannot speak to what Marriott’s strategy is, as Marriott has not shared that with us.”
END GAME
Who, then, will blink? Both Marriott and AAHOA have leverage, but which one is more important to the other? According to most estimates, AAHOA members own around 60% of the total hotel inventory in the U.S., and according to AAHOA numbers, its members own more than 50% of all hotels comprising Marriott’s top across the U.S., with a similar percentage of its members in the pipeline for future Marriott hotels.
As AAHOA and Blake see it, Marriott remains the “crown jewel” of the industry for many AAHOA hoteliers.
A somewhat tangential comment from AAHOA drew comparison between Marriott’s stance vis-à-vis AAHOA here in the U.S. and the continued expansion of its brands in India. Said Blake, “With all of the push back by Marriott here in the U.S., we cannot help but notice that Marriott is taking a very different position in India, from which the vast majority of our AAHOA members originate. She cited an additional 200 hotels by 2025 in India, a number that is not verified by HOTELS.
“This all raises questions as to why Marriott is showcasing such strong financial and marketing support in India, but yet significantly pulling back here in the U.S. where our members constitute a large majority of the developers in the pipeline that are ready to build Marriotts in the States. We are surprised that Marriott’s investors have not started asking questions. Only Marriott has the answers. But the incongruency raises concerns as to whether AAHOA hoteliers should continue their own strong support of brands that do not do likewise.”
A detente is likely the outcome that each organization would want and it’s also conceivable that AAHOA’s posturing is just that—showing force. Both sides potentially have much to lose.
Still, a resolution is possible. “We have more in common than in conflict,” Blake said.