(Written by Steve Eder, Ben Protess and Eric Lipton)
In the early months of the Trump administration, with the president no longer running his family business, his eldest sons embarked on a plan to roll out two new hotel lines in dozens of American cities. It reflected the ambitions of “the next generation of the company,” President Donald Trump’s son Eric said at the time.
Now, in a striking reversal, the Trump Organization is no longer pursuing the signature initiative, according to company officials.
Plans for the two hotel chains, Scion and American Idea, are to be shelved indefinitely, most likely for the remainder of the presidency. As a practical matter, that means calling off just one agreement, in Mississippi, though two years ago the Trump Organization said it had as many as 30 potential deals in the pipeline.
The retrenchment comes as the company faces growing scrutiny from federal prosecutors and congressional investigators, and as a former employee, Michael Cohen, heads to prison for multiple crimes. With Democrats now in control of the House of Representatives, any new hotel deals could have provided investigative fodder for critics of the president.
“We live in a climate where everything will be used against us, whether by the fake news or by Democrats who are only interested in presidential harassment and wasting everyone’s time, barraging us with nonsense letters,” Eric Trump said in a statement. “We already have the greatest properties in the world and if we have to slow down our growth for the time being, we are happy to do it.”
The decision to walk away from the hotel plans is the latest and clearest sign of the perils of running a family business whose owner occupies the White House. As Eric Trump and his brother Donald Jr. downsize the Trump Organization’s hotel ambitions, the president has lamented the toll that elected office has taken on the company. “I lost massive amounts of money doing this job,” he told The New York Times in a recent interview. “This is one of the great losers of all time.”
Some of those losses stem from an ethics code that Trump was encouraged to adopt: It has prevented the company from doing new business abroad during his presidency, halting the global growth that for years brought in millions of dollars in fees. But other wounds have been more directly self-inflicted. In the United States, where the company intended to open the Scion and American Idea hotels, Trump’s divisive rhetoric and polarizing politics have turned his brand into a target for opponents.
The Trump Organization, which the president continues to own, faced local opposition to potential Scion deals in cities like Dallas and St. Louis. Some potential development partners were also scared away by the prospect of intense media coverage and legal and financial vetting from the company’s outside ethics adviser, people briefed on the matter said.
The people said that as of Thursday the Trump Organization was walking away from more than a dozen potential deals in Washington, D.C., and at least five states.
The only new hotel deal the Trumps had announced was in the Mississippi Delta, a remote region unlike anywhere the company had done business. The Trumps planned to collaborate with local hoteliers, the brothers Dinesh and Suresh Chawla, on one Scion and as many as three American Idea hotels.
In a statement about parting ways with the Chawlas, the Trump Organization left open the possibility of reviving the Scion and American Idea brands. The Trumps praised the Chawlas and the would-be Scion property, predicting it would still be “an absolutely spectacular project.”
Dinesh Chawla, whose company plans to move forward on the hotels without Donald Jr. and Eric Trump, declined to comment beyond the statement. The terms of the deal were not disclosed, and it is unclear whether the Trumps were required to compensate the Chawlas in some way for pulling out. In the joint statement, the Chawlas said, “We understand their position completely.”
The failure to launch was hardly foreseen in June 2017, when the Chawlas appeared at Trump Tower in New York to announce the partnership. Donald Jr. told the story of how the families originally met — the Chawlas’ immigrant father had sought business advice decades earlier from Donald Trump, who surprisingly returned the call.
Then, at the end of the event, Eric Trump spoke optimistically about the company’s new direction. “You just wait to see what we do,” he teased a crowd of hotel executives, channeling his father’s flair for salesmanship.
While the retreat from Scion and American Idea is a setback for the company, it also signals that the Trump presidency takes priority over the Trump bottom line.
Long before Eric Trump’s statements on Thursday, some senior executives at the Trump Organization expressed concern that expanding the hotel operation could backfire and reflect poorly on the president, according to the people briefed on the matter, who spoke on the condition of anonymity because they were not authorized to discuss it. The executives worried that any potential new deals could lead to accusations that the company — and its owner — were profiting from the presidency.
In late 2017, Eric Trump foreshadowed a shift in strategy, indicating in an interview that the company would concentrate on its existing golf, real estate and hotel properties.
“If we have to take a break for an eight-year period of time or a four-year period, then it is what it is,” he said, referring to new business opportunities.
At the outset of the presidency, Donald Trump’s sons inherited a company that was coming off a decade of growth, having opened a slate of golf courses and luxury hotels from Chicago to Las Vegas. Marketing deals put the Trump name on properties around the world, as well as on suits, mattresses and a host of other products.
The presidency proved to be a game changer.
The Trump name became so toxic in some places that the company was paid to remove it from hotels in Toronto and New York. The majority owner of the Trump hotel in Panama took a more drastic step, ordering the T-R-U-M-P letters pried off the property with a crowbar.
In the last two years, the company has also been under scrutiny from federal investigators and Democrats in Congress, particularly after Cohen pleaded guilty to arranging hush money payments during the presidential campaign to two women who said they had affairs with Donald Trump. The Trump Organization reimbursed Cohen for one of those payments, and is itself a focus of the ongoing investigation.
The company has also faced a torrent of negative media coverage, most recently over revelations, first reported in The Times, about its employment of unauthorized immigrant workers. The reports, which prompted a review of its properties’ staffs and the firing of more than two dozen workers, came at a time when Trump was denouncing illegal immigration as a threat to national security.
Still, the presidency has not put a damper on all aspects of Trump’s business. Some international deals that were in the works before the election have moved forward, including a Trump-branded hotel in Vancouver and a golf course in Dubai that opened in early 2017, and other plans that are still underway in India, Uruguay and the Philippines.
The Trump International Hotel in Washington, which opened 2016, has surpassed expectations, with its lobby regularly packed with Republican officials and operatives. It has also caused headaches for the company, having prompted lawsuits claiming that Trump is illegally profiting from the presidency. Two cases now working their way through the courts focus on whether patrons of his hotels hail from overseas or state governments, a potential violation of the emoluments clause of the Constitution.
Trump brushed off those concerns in the recent interview with The Times, suggesting that any new business dealings were more than offset by lost opportunities. During the presidential campaign, about six months before his surprising victory, Trump told The Times that he had about 120 deals in the pipeline. His executives had been working on hotel projects across the globe, including in Israel, Saudi Arabia and China.
After the election, the self-imposed prohibition on new development in foreign countries caused the Trump Organization to cancel some proposed deals and its pipeline to rapidly shrink, the company has said. Just before taking office, Trump said his company had turned down a potentially lucrative deal in Dubai.
Closer to home, where fewer restrictions applied, the company focused on the prospect of new hotel lines in cities such as Cincinnati; Nashville, Tennessee; and Valley Forge, Pennsylvania.
The hotels were intended to target an audience different from the patrons of the existing five-star Trump properties. The Scion, a four-star line, would be a hipper boutique option. American Idea, a chain of budget-friendly hotels, would feature hints of Americana. Scion was announced before Trump’s election, and the concept for American Idea materialized after the Trumps spotted an opportunity during the campaign to expand into farther-flung markets with fewer hotel options.
Potential partners, though, were put under a microscope.
The company aborted a Scion deal that was under discussion in Dallas, after The Times reported that the prospective partner had ties to Russia and Kazakhstan and the Trumps’ outside ethics adviser raised questions about the potential deal. The Times also reported that the Chawlas, the partners in Mississippi, had turned to the state government for millions of dollars in support through a tax rebate program.
New business activity slowed even further last year, and the company announced no new hotel deals. The Trump Organization briefly managed a Livingston, New Jersey, hotel owned by the family of Jared Kushner, Trump’s son-in-law, and was in talks to open a Scion on the Jersey Shore that the Kushners would have owned. Both of those endeavors fell through.
The Mississippi hotels seemed to be the exception. Though they were far behind schedule, the hotels showed signs of progress last year, including laying the foundation for some of the buildings.
Trump hotel executives visited Mississippi and spent considerable time working with the Chawlas to revise the plans for the hotels.
The Chawlas, in the statement, left open the possibility of doing business with the Trumps in the future. “We hope that when the time is right,” they said, “we can work with Trump Hotels again.”