The Cost of Doing Business?

A lawsuit filed in April by one of the owners of Marriott Hotels, CTF Hotel Holdings Inc., and unsealed by a U.S. District Court judge in May, alleges that hotel manager Marriott International took kickbacks from suppliers and through a procurement service.

Among the allegations contained in the suit, Hong Kong-based CTF claims Marriott was "secretly soliciting, diverting, and fraudulently concealing kickbacks from Molloy Corp.," an outside contractor that Marriott used to supply audiovisual services to the hotels. CTF also claims that Marriott, as a founding member of Avendra LLC, a hotel-purchasing unit, agreed to "execute agreements to purchase the vendors' wares or to grant access to persons capable of making purchases." The so-called kickbacks were then hidden from the hotel owner and kept by Marriott.

A Marriott spokesperson says the lawsuit is concerning a procurement issue in 20 of their 2,400 hotels worldwide. "We believe the suit is completely without merit, and an effort to generate public attention for matters that should be arbitrated."

The presiding judge in Delaware, where the suit was filed, has stayed the case pending arbitration.

A Philadelphia-based attorney Joshua L. Grimes, who specializes in law for meeting organizers and hotels, says he thinks it is well known that rebates go back to properties and likely drive up prices. "The exclusive vendor pays a fee back to the property," Grimes says. "And when there's a markup for a rebate, that's a hidden charge."

Another downside of exclusivity, he adds, is that it limits choice. If planners go outside the exclusive vendor, the property says it must mark up the service. "The purchasing company might take a rebate. It's something planners have to consider," Grimes says.