An online hotel chain is accusing owners of taking money from them to fund an illegal scheme to keep their properties unoccupied.
The Houston-based Houston Hotel Association is seeking $10 million in damages after the hotel chain was hit by a federal lawsuit that alleges the owners used the hotel’s real estate assets to illegally funnel money into their personal accounts.
Hilton Head Holdings Inc. was the company that owns the Hyatt Regency, a popular Houston hotel and convention center.
Herald-Tribune Media Group has sued Hilton Head Holdings in federal court in the Western District of Texas.
The complaint says that the company allegedly created a fraudulent scheme in which it allegedly promised a $1,000 rebate for every hotel room booked.
Hollywood, California-based Hilton Head is the largest hotel operator in the country, with 1,800 properties in more than 100 countries.
In court papers, the hotel association said it was aware of the allegations in the lawsuit and was not aware of any of the alleged schemes.
The lawsuit seeks damages for breach of fiduciary duty, fraud and false representation, among other things.
Hospital chain, Hyatt Resorts, says it was “distressed and shocked” by the allegations and is considering legal action against the hotel group.
The hotel chain said in a statement that it was not responsible for any unauthorized use of its assets.
“As we continue to investigate this matter, we will make appropriate legal and factual disclosures to our guests and the community,” it said.
The complaint also alleged that hotel operators used their properties to fund their personal spending.
The hotel industry has been struggling to survive as demand for hotels and other accommodations has plummeted.
The number of hotels has fallen more than 60% since the mid-2000s.