Tuesday, April 21, 2009

"Rossgate" Continues - Federal Grand Jury Subpeonas Documents From Hilton

Today, a federal grand jury in New York requested documents from Hilton relating to the allegations that two former Starwood executives (Ross Klein and Amar Lalvani) improperly removed thousands of sensitive and confidential documents relating to Starwood's luxury brands. According to Starwood, these documents were used to enable Hilton to dramatically shorten the time required to bring Denizen to market. In addition, they contained valuable proprietary data about Starwood's development pipeline, developers etc

Hilton has "temporarily" suspended development of the Denizen brand and suspended both Ross and Amar on paid leave.

Oddly enough, however, Hilton has not suspended Ross and Amar from the Denizen website. They are still prominently featured as the brand leaders.

As an aside, we can't help but laugh at how similar Ross looks in this picture to former Starwood Hotels CEO Barry Sternlicht. Funnier still because Barry was the original brains behind the W brand long before Ross arrived on the scene.

This investigation will prove a huge distraction for both Hilton and Starwood over the coming months - how much time will both chains focus on these efforts vs. generating revenue in these trying times?

And how will this change Hilton's development pipeline? We can't imagine that many developers (what few that are in fact looking right now) will be looking to sign a deal with Denizen anytime soon - today's developments should open new opportunities for other, non-Hilton brands in the "lifestyle brand" category.

How far beyond Ross and Amar did the knowledge of these documents go within Hilton? That could be the difference between this affair bringing down just the two Denizens vs. something much broader.

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