Maybe a Large Company Can Do Crisis Management Right

The Hilton Hotels group seems to have successfully managed a public relations crisis involving a licensed operator of a Hampton Inn near Minneapolis/St. Paul, Minnesota, and its refusal to rent rooms to federal immigration enforcement agents. On Monday (January 5), the federal Department of Homeland Security accused the Hilton Hotel family of a coordinated campaign to deny accommodations to federal immigration law enforcement agents after a Hampton Inn near the Twin Cities cancelled a previously scheduled reservation. Almost immediately, online calls emerged to boycott the entire Hilton Hotels system. Later that day, the group's parent organization responded, asserting that its hotels welcomed all, claiming that denying accommodations to federal immigration law enforcement agents was inconsistent with the Hilton Hotels' values. The response noted that the particular hotel was an independent (franchisee) licensee.

If you are not familiar with the hotel business, the brand whose name is on the sign out front or on the top of the building, such as Hilton (or its sub-brand Hampton Inn, Holiday Inn, Marriott, Hyatt, etc.), rarely actually owns or operates the hotel, rather the land and building is typically owned by a group of investors. The hotel is operated by either the same group of investors or a different operating company. These real estate and operating groups manage under license agreements with the hotel brand. These agreements specify the standards that the building and operations must meet to be consistent with the hotel brand (aesthetics, room size, furniture, decor, breakfast buffet content and quality, housekeeping standards, lobby aesthetics, and the rest). Through such license specifications, a customer can expect product consistency — hence a Hampton Inn in Fort Worth, Texas, is substantially similar to a Hampton Inn in Minneapolis or Columbus, Ohio. In exchange for complying with those specifications, the hotel operator gets the benefit of access to the hotel brand’s entire customer base and to the hotel brand’s reservation system.

Tuesday (January 6), the Hilton Hotels parent and the individual hotel operator franchisee confirmed that the matter had been resolved, and that the hotel would welcome all. Yet later that day, independent “journalist” Nick Sotor asked the front desk at that specific Hampton Inn about booking some rooms for immigration enforcement agents. The front desk clerk informed him that, per the property owner/operator policy, he could not do that. Apparently, the public non-discrimination assurances by the franchisee were not true.

By Wednesday (January 7), the Hilton Hotels parent company confirmed that the Hilton Hotels brand group was terminating its license (franchise) agreements with that independent franchisee hotel operator. Many online sources were skeptical whether the hotel chain would really follow through, and whether the operator would really suffer.

But late on Wednesday, several online sources confirmed that this particular Hampton Inn, which precipitated the controversy, no longer appeared in searches of Hilton-branded hotels.

By Thursday morning, photographs circulated on the internet confirming that a crane was removing the Hampton Inn sign at the front of the hotel. The removal of the large sign from the hotel property strongly suggests Hilton is serious about its values of all, regardless of politics.

In the relatively free market found in the United States, the individual operators of the hotel are free to refuse service to different classes of customers (subject to specific anti-discrimination laws). But if the hotel has someone else’s name on it (such as one of the Hilton brands), the entity whose name is on the hotel also has input on whom the hotel will or will not serve. The entire Hilton chain may nonetheless suffer some negative consequences from customers blaming it for the actions of the particular operator. Nonetheless, I found it gratifying that the Hilton Hotels brand responded quickly and decisively to remove a Hilton brand name from a hotel that operated at odds with Hilton brand values - in a manner that had the potential to damage the entire enterprise.

I wonder how much the operators of the specific hotel considered the possibility that Hilton Hotels would revoke their franchise agreement, and whether they calculated the relative value of the Hilton brand versus the value of signaling their anti-Trump or anti-law virtues. But the Hilton Hotels chain likely averted a public relations disaster that might have resulted from refusing to accommodate federal law enforcement personnel.