Ethics, loyalty challenge new Trump hotels
NEW YORK — You might have expected the Trump Organization to tap the brakes on expansion plans given all the criticism over potential conflicts of interest while its owner sits in the Oval Office. It’s hitting the accelerator instead. The company owned by President Donald Trump is launching a chain of new hotels with plans to open in cities large and small across the U.S. Called Scion, they will be the first Trump-run hotels not to bear the family’s gilded name. The hotels will feature modern, sleek interiors and communal areas, and offer rooms at $200 to $300 (all figures U.S.) a night, about half what it costs at some hotels in Trump’s luxury chain.
The company has signed letters of intent with more than 20 developers to build the hotels, said Trump Hotels CEO Eric Danziger. The last three were signed in just one week earlier this month.
“It’s full steam ahead. It’s in our DNA. It’s in the Trump boys’ DNA,” said Danziger. The “boys” are Eric and Donald Jr., who are running their father’s company while he is president.
The bold expansion plan raises some thorny ethical questions.
The Trump family won’t be putting up any money to build the hotels. Instead, it plans to get local real estate developers and their investors to foot the bill, as do most major hotel chains.
Government ethics experts say turning to outside money, whether foreign or American, raises the spectre of people trying to use their investment to gain favour with the new administration — like contributing to a political campaign, but with no dollar limits or public disclosure.
“This is the new version of pay-to-play, ‘Get in there and do business with the Trump Organization,’” said Richard Painter, who was the chief White House ethics lawyer to president George W. Bush.
The Trump family will have to overcome some political obstacles, too. Already, politicians in a few cities mentioned as possible sites have vowed to fight the first family, raising the prospect of a struggle to get zoning and other permits to start building.
Danziger is no stranger to long odds. He never went to college, instead taking a job as a bellman at a San Francisco hotel at 17. He worked himself up over the decades to CEO spots at several major hospitality companies.
When Danziger led Starwood Hotels and Resorts in the 1990s, he expanded the number of hotels from 20 to nearly 600.
The 62-year-old executive has similar ambitions for the Trump family. He said he hopes to open 50 to 100 Scions in three years, and is planning to add to Trump’s existing line of luxury hotels.
Danziger took over Trump’s hotel business in August 2015 with hopes of adding to the company’s string of properties abroad. A review of trademark databases by The Associated Press shows the Trump family has applied for rights to use the Scion name in several countries, including China, Indonesia, Canada and 28 nations in Europe.
At a panel discussion at a recent hotel industry conference, Danziger said the U.S. offers plenty of opportunity for expansion. Danziger shrugs off the danger from anti-Trump folks. Stopping a Scion from opening would hurt a city, he said, just as surely as it would hurt the Trumps.
“Why would a city because of political views, a city councilman’s views, prohibit tax revenue from coming to the city and employment to the people?” Danziger said. “It doesn’t make sense.”
He also expressed confidence Scion will avoid ethical trouble. He said any new investors in Scion go through an “exhaustive, thorough” review to make sure, for instance, they’re not offering sweetheart deals to the Trump family to curry favour with the president.
Politics aside, Trump’s new chain faces stiff business challenges.
The U.S. president is a tiny hotel operator, with just 14 properties that he either owns or licenses his name to or manages for others, according to his company’s website. This puts it at a disadvantage compared with, say, Marriott International, which has more than 6,000 hotels and can get deeper discounts when purchasing insurance and food and linens. The bigger companies have powerful loyalty programs to lure travellers, too.
“Why do people stay at Marriotts all the time?” said Bjorn Hanson, professor of hospitality and tourism management at New York University. “They’re earning points.”
Trump’s Scion chain also faces a fight for customers against an array of new chic “lifestyle” chains from Marriott, Hilton and other rivals.
Danziger said he’s not worried. “Every industry on the planet is crowded.”