Is it legal for a hotel to modify Yellow Pages directories ...

The hotel is, in effect, producing a modified version of a copyrighted work without the consent of the author(s). The reputation of the author(s) is being undermined since the advertisers purchased space in the book under the assumption that whoever purchased the ... Yes, it is a derivative work, but they are not profiting form it. it is Fair Use under the principle (I forget the name right now) where you can do whatever you want with your own copy (including selling it). ...