Indian American Hoteliers Sue 2 Top Franchisors for Exploitation During Pandemic

Indian American hoteliers have filed lawsuits in federal court accusing two of the biggest hotel chains in the world of gouging them with fees, penalties, and overpriced products, an Associated Press report has revealed. As per the AP report, the lawsuit accuses Choice Hotels International and Intercontinental Hotels Group indulged in excesses which “reached a tipping point during the pandemic when the hospitality industry experienced a steep drop in business.” Choice Hotels International is the company behind the Comfort Inn brand, while Intercontinental Hotels Group is the franchisor for Holiday Inn. 

Spearheading the legal fight is Vimal Patel, president of Q Hotels, who filed a lawsuit in May in U.S. district court in New Orleans, according to the AP report. AP says Vimal Patel “was the first of at least five suits against IHG that are being coordinated by two law firms and seek to represent a larger group of franchisees as a class action.”

Rich Gandhi, 39, told AP that during the pandemic, “Choice made him buy its branded hand sanitizer though he had already secured a cheaper supply for his Quality Inn in Middletown, New Jersey.” Then, the company penalized Gandhi “for using a different internet provider and piled on fees for services such as credit card processing and cybersecurity that were not in his original agreement.” Gandhi told AP that his family had spent “$3.5 million buying and renovating the property.” He described this behavior by Choice as “extortion, blackmail.” They are basically cutting up the hen that is laying the golden egg for short-term gain.”

However, IHG spokesman Jacob Hawkins said in a statement to AP that he does not believe the claims have any merit. Choice “has always had a strong commitment to the success of its franchisees,” he said, adding that the company “is committed to treating its hotel owners fairly.”

The suit also accuses Choice and IHG executives “of routinely making racially derogatory comments about Indian American franchisees, though they don’t provide examples of any remarks,” AP reports. 

The lawsuit alleges “that both companies enforce their standards more strictly against Indian Americans.” Additionally, the Choice suit says it “provides more financing to white owners and has largely spared them from a rule forbidding two-story properties from carrying the Comfort Inn brand.” 

Choice said in its statement to AP that “it does not tolerate any form of discrimination and is regularly recognized for its long-standing and deep commitment to diversity, equity and inclusion..”

Meanwhile, in March, a judge in Pennsylvania ordered the franchise owners in that suit to arbitrate their claims individually with Choice. But Gandhi told AP that “he will fight on.

There’s nothing to lose now,” he said. “With COVID, we’ve been in such bad shape, it kind of emboldened us even more to go after these guys because you’re like, ‘We’ve seen the worst.’”

A new report released last week by American Hotel & Lodging Association (AHLA) shows that the road to recovery for the hotel industry is long “with 21 of the top 25 U.S. hotel markets remaining in a depression or recession” AHLA says the new data shows urban hotels are still in a “depression” cycle while the overall U.S. hotel industry remains in a “recession.” 

Urban markets, which rely heavily on business from events and group meetings, continue to face a severe financial crisis as they have been disproportionately impacted by the pandemic. “Urban hotels were down 52% in room revenue in May compared to May 2019,” the report found out. 

“While some industries are starting to rebound as COVID-19 restrictions ease across the country, the U.S. hotel industry is still in a recession, with the hardest hit markets in a depression,” said Chip Rogers, president and CEO of AHLA. “While many other hard-hit industries have received targeted federal relief, the hotel industry has not. We need Congress to pass the bipartisan Save Hotel Jobs Act so hotels in the hardest hit regions, especially urban markets, can retain and rehire employees until travel demand, especially business travel, comes back to pre-pandemic levels.”

 Hotels are the only segment of the hospitality and leisure industry yet to receive direct aid despite being among the hardest hit.