Hampton Inn West Jefferson loses franchise rights, hotel operations to continue
Last modified: Apr. 4, 2013
Patel confirmed in an April 1 interview that the name, Hampton Inn West Jefferson, will for now no longer be used because franchise fees owed to parent company Hilton Worldwide have not been paid.
“With a hotel — the name is the game,” said Patel. “The building is still the same —we’re not changing anything in the building for right now, but the name is everything.”
The change also means the hotel is no longer backstopped by the resources of Hilton Worldwide — including the computer system the hotel has used to operate the facility.
"Today — it’s back to pen and paper," said Patel. "Until we come to some kind of resolution, we're in a tight spot. I can't go out and buy a $10,000 computer system."
The Ashe Mountain Times reached out to Hilton Worldwide for comment, including Global Director of Public Relations John Walls, who said, "Since we are a 100 percent franchised brand, (decisions about franchises) are made at the hotel level in conjunction with the property's ownership group," which, in this case, is Patel, according to Walls.
The company that owns Hampton, Trimurthi Hotels Land Holdings WJ, LLC, filed for Chapter 11 bankruptcy on Dec. 1, 2011, in North Carolina Western Bankruptcy Court, according to court records.
The filing was later dismissed in January of this year, according to Patel.
“After (the bankruptcy) was dismissed, we started to negotiate with Hilton and our lenders,” said Patel. “We knew something had to break.”
Patel said he reached an agreement with Hilton that would allow his company until April 1, to pay the franchise fees that had accumulated during the 14 months the hotel was in bankruptcy.
Hilton requires $60,000 up front, and 11 percent of profits per month as franchise fees, according to Patel.
Hopefully, the deal would give Patel time to reach an agreement with his lenders, he said, but that hasn’t happened yet.
“(Hilton) told us that if something changes, fine, pick up the phone and call and we’ll go from there,” said Patel. “But they told us they’re shutting the system off.”
When asked how the change would affect the hotel moving forward, Patel said he had, “no idea,” but said his No. 1 goal is to reach a satisfactory resolution with both his lenders and Hilton.
“I’m a man of my word,” said Patel. “I’m not going to talk to (any other hotel franchises) until this all gets resolved. That’s our goal — (Hilton) told us when we get things resolved, to pick up the phone.”
Patel said he is hopeful he'll eventually reach an agreement with his lenders.
"If the offers we've made to resolve everything are accepted, then, yes, I think we can resolve things," said Patel, "but to pay Hilton, we've got to get an agreement worked out with our bank."
Still, the business owes between $70,000 and $80,000 in occupancy and property taxes to Ashe County, according to a Jan. 22 interview with Ashe County Manager Pat Mitchell.
Mitchell confirmed that the county is authorized by the state to collect a 3 percent occupancy tax, with a third each of the proceeds going to the Ashe County Civic Center, the Ashe County Chamber of Commerce and the Historic Ashe County Courthouse.
“Hampton had missed at least a year (of occupancy tax payments),” said Mitchell in January, “and then they went into bankruptcy. Our question became, could we collect occupancy tax while they were in bankruptcy, plus the last I looked they had not paid property tax in at least a couple years.
We just found out that the judge is going to set aside the bankruptcy proceeding, so we’re going to issue a demand on (occupancy and property taxes).”
In previous interviews, Patel said he did not dispute owing the county two years worth of property taxes, and a certain amount of occupancy tax, but calculated the total closer to $56,000. In addition, Patel said his company had paid a premium on its debt service of between $170,000 to $180,000.
"We've tried to emphasize to our lenders that we need to catch up on other payments (including Ashe County), but right now we're at the mercy of the bank," said Patel in January.
Issues with Hampton Inn West Jefferson began almost immediately, according to Patel, as construction delays forced the hotel to open two years later than expected, and in a slumping economy.
“There’s been no help from the county or the town to increase tourism or the industrial base,” said Patel in January. “At the end of the day, our (revenues) are about 30 percent lower than we estimated they (would be) in 2007 and 2008.”
Patel also said the, "the best case for everybody," would be to reach an agreement with the bank, "and we can catch everybody up."