Hilton delays luxury hotel chain on corporate spying probe

Hilton's Auckland hotel on Princes Wharf. Photo/ Dean Purcell

Hilton Hotels has suspended development of a new super-luxury chain of hotels after claims of industrial espionage triggered a criminal investigation.

Last month Hilton revealed the creation of Denizen Hotels, aimed at "citizens of the world", with sites planned in 13 major cities including London, New York and Mumbai.

However, Starwood, owner of the luxury W chain of hotels and the Sheraton and Le Meridien brands, alleges that Denizen's launch had been based on 100,000 documents, presentations and market research stolen by its former employees.

Hilton poached two executives, Ross Klein and Amar Lalvani, from Starwood to work on Denizen in June last year, and Starwood claims the two men downloaded the documents to personal email addresses before they left. Together, the documents amounted to a blueprint for the launch of the W chain, Starwood claims, and Hilton would not have been able to launch Denizen in the space of less than a year without all that information.

Following those investigations, the US attorney's office in New York has issued a subpoena for the documents, including those that Hilton says were returned to Starwood in February of this year.

A federal grand jury is also examining whether to bring criminal charges in the case.

Hilton announced the subpoena and the suspension of Denizen's launch late on Tuesday.

Last week, Starwood sued Messrs Klein and Lalvani and Hilton for corporate espionage. The two men spearheaded Hilton's attempts to launch Denizen: Mr Klein is the group's head of luxury and lifestyle brands, while Mr Lalvani serves as head of development for the segment.

However, the two executives are currently on administrative leave "pending a review of the situation," Hilton said.

Hilton, which is owned by the private equity group Blackstone, has been criticised for being slow to enter the luxury lifestyle segment of the hotels market.

Denizen is designed to be Hilton's answer to the W chain, so much so that Mr Klein said at a press conference that Denizen was "cut from the same cloth as W in many respects".

Nevertheless, the company and the two executives deny the accusations that have been levelled against them by Starwood.

- THE INDEPENDENT