Trump Hotels announced on June 6th that it has teamed up with Chawla Pointe, LLC, to launch “American Idea,” a midscale brand of lodging in the Mississippi Delta area. Indian American hoteliers Suresh Chawla and Dinesh Chawla, whose late father V.K. Chawla founded Chawla Pointe in the 1980s, currently run the business. They will partner with Trump Hotels to initially build three hotels in the region.
American Idea hotels will build upon President Donald Trump’s pledge on the campaign trail to put America first. The three-star chain will feature artifacts of American culture in the hotels, such as an old Coca Cola machine in the lobby or American-made sundries in the rooms, reported the New York Times.
When Suresh Chawla began construction on a luxury hotel in rural Mississippi last fall, he had no idea it would be the first in a series of new licensing agreements with The Trump Organization.
Chawla, who manages a small chain of hotels with his brother, Dinesh, envisioned an upscale offering to complement the 17 mid-scale hotels the family already operates. The new hotel, which is expected to be completed in first half of 2018, would be called the Lyric Hotel and Spa, and allow “guests from all over the world to immerse themselves in Mississippi culture.”
Now, some nine months after breaking ground on the hotel, Chawla Hotels is teaming up with President Donald Trump’s sons to make that aim a reality. It’s the same idea, the Chawla brothers say, but with the day-to-day operations turned over to the Trump Organization in a licensing deal the Trumps aim to replicate across the country. The new four-star chain, dubbed “Scion,” will be built by local partners such as Chawla Hotels that have agreed to pay royalties and other fees to the Trump Organization.
“The Trump Organization will be branding the hotel as a Scion hotel,” Suresh Chawla explained. “They will be managing and marketing the hotel. My brother and I are a board of directors that will consult them.”
In addition to the Scion-branded hotel, the Chawla brothers have agreed to move three of their existing hotels under a new brand called “American IDEA,” a more affordable, three-star option that Trump’s sons, Eric and Donald Jr., announced Monday in New York. Unlike the higher-priced Scion option, which the Trump Organization will run, American Idea hotels will be managed by partners such as the Chawlas.
The Chawla brothers are the first publicly announced partners in both chains, which are expected to grow rapidly in the coming months. “We were developing our own hotel. We were going to go full-service boutique. We had no idea we’d be associated with the Trump Organization,” Suresh Chawla told Forbes Monday evening on his way to the announcement in New York. “Now, we are doing a whole new interior package. It’s going to be much higher quality.”
So how did a pair of Indian-American immigrants become business partners with the Trump family?
It began with a phone call in March. Suresh Chawla was on spring break, watching a tennis match with his family. He received a call was from an employee at the Trump Organization who had read about the Chawla’s new hotel and wanted in on it. “They read about our hotel and asked if we’d be interested [in partnering]. I had to Google ‘Scion’ to find out what it was,” Dinesh Chawla said, adding that he quickly realized he and his brother “shared about 80 percent of our goals” for the hotel with the Trump Organization. “We want it to be a great social enterprise, as well as a profitable enterprise. … I really felt they listened to us.”
The Chawla brothers declined to disclose the details of their financial arrangement with the Trump Organization. Mitch Garrett, a vice president of Acquisition & Development at Trump Hotels who helped broker the deal, did not respond to a request for comment.
“The only thing I can say for sure,” Dinesh Chawla said, “is on the Scion deal the Trump Organization will manage the day-to-day. And we hope they look out for our financial interests; I can’t imagine they wouldn’t. We have some leverage, too. We are their first hotel [under the Scion brand]. If we suck, there’s going to be a deflating effect.”
The hotel industry has seen several years of consecutive growth. But while Asian markets are demanding construction of luxury and upscale hotels, U.S. markets have skewed toward mid-scale and upper-mid-scale chains. Think: La Quinta Inn & Suites, Quality Inn, Holiday Inn and now–American IDEA. Overall in the US, the number of hotel rooms currently in construction is up 18% from last year. Mid-scale and upper mid-scale hotels are up 35% and 21% respectively, according to the research firm STR, Inc.
Prominent hotel operators have recently expanded their mid-scale offerings. Last month, Hilton opened doors on a new hotel brand dubbed “Tru.” The chain is expected to be Hilton’s largest brand by number of units, with more than 400 Tru hotels in development. Marriott, meanwhile, recently introduced “Moxy,” a budget friendly hotel chain with millennial travelers in mind, after a successful brand launch in Europe.
In the case of Chawla Hotels and the new American IDEA properties, the Chawla brothers said they will complete renovations prior to transferring the name in the spring of 2018. The hotels must adhere to standards set by the Trump Organization in the licensing agreement. While Donald Trump turned over management of his company to his sons upon taking office earlier this year, the president has been criticized for not doing enough to separate himself from the family business.
In March, Eric Trump told Forbes that he would provide copies of the company’s financial reports to his father on a regular basis.
That the Trump Organization is launching its new, cheaper hotel lines with a pair of socially liberal immigrant entrepreneurs isn’t lost on the Chawla brothers. The arrangement was kept under wraps until Monday afternoon, when The New York Times first reported details of the deal. But the relationship had been a long time in the making for the Chawla brothers, whose father cold-called Donald Trump some 30 years ago to ask for a loan. Trump declined, Suresh Chawla said, but offered his father advice that would stick with the family as it grew a modest hotel chain in the Mississippi Delta.
“This all started because of my father and his hard work 30 years ago,” Suresh Chawla said, adding that his parents came to the United States after falling in love at a refugee camp in 1947.
Suresh Chawla has come to support Trump as president–he donated to his campaign–but he initially favored Marco Rubio. While the Chawla brothers were raised in a staunchly Democratic household, they said politics did not get in the way of their current business partnership with the Trump Organization. “My father was a Bill Clinton fanatic. When he first moved here in 1977, he was a Jimmy Carter guy,” Suresh Chawla said. “Despite all that, he would still have loved to do this deal. … Associating with the Trump brand will be good for the Delta.”
What about President Trump’s stance on immigration, including his failed bid at temporarily blocking travel to the U.S. from citizens of a half-dozen mostly Muslim countries? Are the Chawla brothers concerned about possible political ramifications from doing business with the Trumps?
“I don’t even understand the travel ban,” Suresh Chawla said. “The whole concept of what’s going on there… I kind of stay away from all that. I do know this country was built by immigrants–including us. But I don’t know what to think as far as the politics of the travel ban.”
“The most important thing,” Suresh continued, “is we’re hoping that tourism will boom in the Delta as a result of [the deal with the Trump Organization]. That is the overriding issue here.”
Dinesh Chawla said he voted for Barack Obama in 2008. He supported Hillary Clinton last year, and said he encouraged his female hotel managers to study her preparation for public speaking engagements when dealing with challenging situations at work. “I liked Hillary a lot. If I had a daughter, she would be a role model.”
Still, the deal with the Trump Organization, he said, “is not a political thing. It’s purely business.”