The Shady Rest is full with guests, while the Pixley Hotel is just about empty. The Pixley Hotel's unscrupulous owner, Murdock Sneep, suggests to Kate that they merge their businesses. Kate declines as she knows how empty the Pixley Hotel is. An angry Sneep threatens to ruin Kate. He starts with an aggressive advertising campaign. Sneep and Kate then both try to one up the other. But soon both realize this no-holds-barred "hotel war" is costing each of them money and someone else is capitalizing on their feud.