Trump Hotels goes downscale

Industries Dow Jones Newswires

The hotel company bearing the president's name is moving into a relatively modest segment of the U.S. hospitality market, courtesy of a pair of new brands designed to be less luxurious than its current locations. 

Continue Reading Below

Trump Hotels said Monday evening that Cleveland, Miss., will be the first location for its new Scion hotel chain, a slightly less upscale brand it announced last fall to cater to younger travelers. Executives also said they plan to launch a new line of hotels called American Idea, intended to compete with chains like Hampton Inn and Holiday Inn Express. 

More From FOXBusiness.com...

"The product is very hometown and fits in every hometown in the United States," Trump Hotels Chief Executive Eric Danziger said at a cocktail event to announce the deals at Trump Tower in New York. 

The same Mississippi hotel owner working on the first Scion deal, Chawla Hotels, will also work with Trump Hotels on the first three of the American Idea locations, which will be a franchise model, meaning Trump Hotels won't manage them directly. The Scion hotel, expected to open by the end of the year, will be managed by Trump Hotels. 

Donald Trump Jr. said he met one of the owners, Suresh Chawla, at a campaign event in Mississippi last year and got the idea for the new brand after hearing a story about his father, an Indian immigrant. 

Mr. Chawla told the younger Mr. Trump that his father had been trying to open his first hotel in the late 1980s but was struggling to get financing. So he cold-called the elder Donald Trump's office and, after spending hours on hold, spoke with Mr. Trump for about 30 minutes, getting some advice on Small Business Administration loans that he could use to complete the project. 

Continue Reading Below

After the campaign, the younger Mr. Trump said he and others at Trump Hotels tracked down Mr. Chawla and his brother, Dinesh, and approached them about the new American Idea brand. 

During the campaign, Donald Trump Jr. said he realized "there's a market here we've been missing our entire lives, just focusing only on the high end." 

The new offerings will be the first Trump Hotels venture that attempts to cater to middle America, and it comes as the company has had to focus on expanding only its domestic business after Mr. Trump's election as president. 

He vowed that the company wouldn't strike new foreign deals during his presidency and would be managed by his sons. Ethics experts have argued that the arrangement doesn't do enough to separate him from his business interests. 

The Chawla brothers said they started discussing the idea with Trump Hotels in March. They said they didn't support Mr. Trump during the campaign but admire his approach to business and the brands he has created. 

Suresh Chawla said that Mr. Trump's popularity in Mississippi "doesn't hurt," but added that they will be trying to also attract international visitors who are interested in Mississippi's blues music history. 

"Their ability to market this to the world is going to be great," Mr. Chawla said. "We need to showcase this place." 

For the Scion hotel brand, Mr. Danziger said the company has an additional 39 signed letters of intent, which are nonbinding, early-stage deals. He said he expects to announce more deals for both brands in the near future. 

Write to Chris Kirkham at chris.kirkham@wsj.com