Blaming political climate, Trumps give up on new hotels
In the early months of the Trump administration, with the president no longer running his family business, his eldest sons embarked on a plan to roll out two new hotel lines in dozens of American cities. It reflected the ambitions of “the next generation of the company,” President Donald Trump’s son Eric said at the time.
Now, in a striking reversal, the Trump Organization is no longer pursuing the signature initiative, according to company officials.
Plans for the two hotel chains, Scion and American Idea, are to be shelved indefinitely, most likely for the remainder of the presidency, a decision that partly reflects a fundamental business problem: a lack of deals. Despite stating publicly that it had built a pipeline of about 30 potential deals, the Trump Organization was able to announce only one partner, and the company announced last week that the agreement had been called off.
The retrenchment comes as the company faces growing scrutiny from federal prosecutors and congressional investigators, and as a former employee, Michael Cohen, heads to prison for multiple crimes. With Democrats now in control of the House of Representatives, any new hotel deals could have provided investigative fodder for critics of the president.
“We live in a climate where everything will be used against us, whether by the fake news or by Democrats who are only interested in Presidential harassment and wasting everyone’s time, barraging us with nonsense letters,” Eric Trump said in a statement.
The decision to walk away from the hotel plans is the latest sign of the perils of running a family business whose owner occupies the White House. As Eric Trump and his brother Donald Jr. downsize the Trump Organization’s hotel ambitions, the president has lamented the toll that elected office has taken on the company. “I lost massive amounts of money doing this job,” he said. “This is one of the great losers of all time.”
The only new hotel deal the Trumps announced was in Mississippi, a region unlike anywhere the company had done business. The Trumps planned to work with local hoteliers, brothers Dinesh and Suresh Chawla, on several hotels.
While the retreat from Scion and American Idea is a setback for the company, it also signals that the Trump presidency takes priority over the Trump bottom line.
Some senior executives at the Trump Organization have long expressed concern that expanding the hotel operation could backfire and reflect poorly on the president, according to the people briefed on the matter, who spoke on the condition of anonymity because they were not authorized to discuss it. The executives worried that any potential new deals could lead to accusations that the company — and its owner — were profiting from the presidency.
In late 2017, Eric Trump foreshadowed a shift in strategy, indicating that the company would concentrate on its existing golf, real estate and hotel properties.
“If we have to take a break for an eight-year period of time or a fouryear period, then it is what it is,” he said, referring to new business opportunities.
Still, the presidency has not put a damper on all aspects of Trump’s business. Some international deals that were in the works before the election have moved forward, including a Trump-branded hotel in Vancouver and a golf course in Dubai that opened in early 2017, and other plans that are still underway in India, Uruguay and the Philippines.
The Trump International Hotel in Washington, which opened in 2016, has surpassed expectations, with its lobby regularly packed with Republican officials and operatives. It has also caused headaches for the company, having prompted lawsuits claiming that Trump is illegally profiting from the presidency. Two cases now working their way through the courts focus on whether patrons of his hotels hail from overseas or state governments, a potential violation of the emoluments clauses of the Constitution.
Trump brushed off those concerns, suggesting that any new business dealings were more than offset by lost opportunities. During the presidential campaign, about six months before his surprising victory, Trump said he had about 120 deals in the pipeline, including in Israel, Saudi Arabia and China.
After the election, the self-imposed prohibition on new development in foreign countries caused the Trump Organization to cancel some proposed deals and its pipeline to rapidly shrink, the company has said. Just before taking office, Trump said his company had turned down a potentially lucrative deal in Dubai.
The company aborted a Scion deal that was under discussion in Dallas, after the Times reported that the prospective partner had ties to Russia and Kazakhstan and the Trumps’ outside ethics adviser raised questions. The Times also reported that the Chawlas had turned to the state government for millions of dollars in support through a tax rebate program.
New business activity slowed even further last year, and the company announced no new hotel deals. The Trump Organization briefly managed a Livingston, N.J., hotel owned by the family of Jared Kushner, Trump’s son-in-law, and were in talks to open a Scion on the Jersey Shore that the Kushners would have owned. Both of those endeavors fell through.
The Mississippi hotels seemed to be the exception. Though they were far behind schedule, the hotels showed signs of progress last year, including laying the foundation for some of the buildings.
Trump hotel executives visited Mississippi and spent considerable time working with the Chawlas to revise the plans for the hotels.
The Chawlas, in the statement, left open the possibility of doing business with the Trumps in the future. “We hope that when the time is right,” they said, “we can work with Trump Hotels again.”