Thursday, April 16, 2009

Starwood sues Hilton over Denizen - "Zengate"

The Wall Street Journal is reporting that Starwood Hotels and Resorts Worldwide (HOT) has sued Hilton Hotels over trade secrets relating to Hilton's new brand, Denizen. We previously discussed Denizen when it was launched a few weeks ago in Berlin and noted its remarkable similarities to Starwood's W Brand. However, at the time, we chalked it up to Ross Klein's memory and panache. (Hey, Panache isn't a bad name for a boutique brand, is it?)

If Starwood's claims are true, it may be more than simply enduring style and charm that helped define Denizen. Starwood claims "This is the clearest imaginable case of corporate espionage, theft of trade secrets, unfair competition and computer fraud." Strong words indeed.

So, what, if anything, might have Ross taken with him? Revenue projections and past performance? Bliss soap samples? Music play list for the elevators? This isn't like stealing the recipe for Coke or the nuclear launch codes but it clearly sounds as if Ross left with more than a towel or two.

Indeed, according to Starwood, Ross and Amar departed with literally boxes (8 of them!) of documents detailing extensive market research, sensitive management contracts and blueprints for developing a new brand - something Starwood clearly knows a few things about given the launches of W, Element, and aloft.

Starwood has also sought a full injunction against Hilton from using any of the documents in launching the Denizen brand which, if successful, could effectively shutter the brand for some time.

It will be interesting to watch this play out in court. And it will be a huge distraction for both chains at a time when revenue generation is critical.

1 comment:

  1. I wonder what Hilton's crisis-communications strategy is on this one? On the other hand, perhaps it is too "inside-baseball," with consumers not giving a hoot. What did Hilton know and when did it know it? The plot thickens. Nice post, Tom. You are carrying the ball on this one.