Vancouver Mayor Gregor Robertson wants the Trump name erased from the city’s skyline, but the financial hit involved in doing so makes that very unlikely, says a hotel valuation expert.
“If the [hotel] owner breaks the contract, they would be on the hook for whatever the liquidated damages are in the contract, which can be very significant,” said Carrie Russell, managing director of HVS Canada.
The Holborn Group is in the midst of constructing a $360 million, 63-storey luxury hotel and condominium tower in downtown Vancouver. The hotel will be managed by Trump Hotel Collection. Donald Trump is president and chairman of the company.
That’s a problem for former Vancouver chief planner Brent Toderian, who suggested last week the Trump name had no place in the city. Toderian went public with his concerns after Trump, a Republican presidential nominee, made inflammatory comments about keeping Muslims out of the United States.
Vancouver city Coun. Kerry Jang agreed the Trump name should be removed, and this week Mayor Gregor Robertson sent Joo Kim Tiah, CEO of the Holborn Group, a letter asking him to remove the brand from the property.
Agreements of this sort are very common in the hotel industry, Russell said. Large hotel companies rarely own the properties they manage; instead they enter into licensing and management contracts with the property owner and then take 3-5% of the hotel’s revenues. The Rosewood Hotel Georgia, Shangri-la Vancouver and Fairmont Hotel Vancouver are examples of the business model, which is especially common for high-end hotels.
Trump Hotel Collection is a smaller player compared to some of the very large hotel companies, Russell said. Trump hotel rooms are in the range of $500-$600 a night, according to Trump Vancouver general manager Philipp Posch, a company veteran who moved to Vancouver to manage the Holborn property. Penthouse condominium units in the tower have been priced at over $20 million.
The contracts are typically 20 years or longer, and include clauses that would see the property owner pay the hotel company damages for lost fees if the contract is broken. For new developments, an agreement with a hotel management company is usually signed years in advance.
The potential financial hit would be significant, Russell said.
The number of rooms and the room rates suggest that the Holborn Group could bring in roughly $20 million in revenue per year from the hotel, with around $1 million of that going to the Trump Hotel Collection.
Earlier this week, Tiah stated: “While the Holborn Group owns Trump Vancouver, we have contractual obligations to the Trump Organization, banks, purchasers, consultants, trades and business partners. These legally-binding contracts cannot be altered.”
Business in Vancouver was unable to reach Tiah for comment.
Russell observed that the association with the Trump name gave Holborn’s development immediate media attention, in comparison with other hotel deals that didn’t make much of an impact.
As Trump continues to make statements that many find belligerent and offensive, other organizations have sought to distance themselves from him.
Media reports have suggested R&A, which organizes the British Open, will not host the golf tournament at the Trump Turnberry. The PGA of America has said it will not use a Trump-owned golf course near Los Angeles to host the PGA Grand Slam of Golf.
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