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Waikiki Edition Changes Management; Marriott Fights Back

August 29, 2011 By: Jena Tesse Fox

Dramatic news from Waikiki today: The Wall Street Journal is reporting that the owners of the Waikiki Edition in Hawaii have installed new management and changed the signs and locks on the hotel to reflect a new name, the Modern Honolulu. The changes were made in spite of a contract that allows Marriott to run the hotel as an Edition for 30 years.

M Waikiki LLC, a hotel investment group, has selected Modern Management Services, LLC, an affiliate of Aqua Hotels & Resorts as the new management company of the former Waikiki Edition Hotel. The 353-room property will now be a flagship property of the Aqua brand.

In a statement, M Waikiki LLC alleged that the hotel has suffered from mismanagement by Marriott which were compounded by Marriott’s failure to develop the Edition brand with which the property was previously affiliated. Modern Management Services says that they plan to offer employment to current hotel staff members, who will maintain their current rate of pay, original start date and accrued vacation.

Marriott, for its part, released a statement declaring that the hotel’s owner had "knowingly, wrongfully, and materially" breached a long-term management agreement with Marriott with 29 years remaining. Marriott has demanded that the owner’s partner vacate the hotel and return control to Marriott. Marriott will also seek substantial damages from the hotel’s owner and its partners for their conduct in damaging the operation and reputation of the hotel, Marriott and the Edition brand.

Stephanie Hampton, Senior Director of Global Corporate Relations for Marriott, told Travel Agent that the owner and its partners "raided the hotel under the cover of night, forcibly took over property and threatened employees with dismissal. We consider this an illegal event, and we plan to pursue all remedies."

This turn of events comes more than three months after the owner filed a lawsuit against Marriott and boutique hotelier Ian Schrager. The property opened as the first Edition hotel in late 2010 and, according to allegations in the lawsuit, has suffered from "poor occupancy, a brand with virtually no identity, and Marriott’s unwillingness to control expenses."

The complaint alleges that despite Marriott’s representation in 2007 that it had agreements in place to open nine hotels in major cities worldwide within the year, with up to 100 more coming soon thereafter, there is only one other Edition Hotel, a 77-room Istanbul, Turkey property that just recently opened. The lawsuit says that defendants’ failure to perform their obligations have “resulted in outrageously low occupancy levels and average daily room rates for the Hotel.”

According to the owner, during the three-month period of May – July 2011, the hotel sustained staggering operating losses of $1.9 million. Approximately a week ago, an updated 2011 forecast prepared by Marriott increased the projected loss for the remainder of 2011 from $1.2 million to over $1.9 million – resulting in total projected operating losses for the year of almost $6.4 million. The statement goes on to claim that a recent report from Smith Travel Research indicates the hotel has a RevPAR (revenue per available room) Index of 47 percent year-to-date. Even in July 2011, as the local hospitality market flourished, the hotel had occupancy rates that were almost 20 percent below its competitive set and a RevPAR index of only 54 percent.

In the meanwhile, Marriott is fighting back. "We are firmly committed to the Edition," Hampton told Travel Agent. "The hotels in Waikiki and Istanbul have opened to rave reviews. We've invested more than $400 million in the hotels, and properties in London and Miami Beach are coming. Unfortunately, the hotels opened in middle of a financial crisis and its aftermath, so the timing hasn’t been good, but we are committed to the brand."

For the immediate future, reservations cannot be made at the hotel through normal Marriott channels, including and Marriott’s voice reservations phone numbers. For existing reservations or other questions, guests should contact Marriott Customer Care at 800-559-9352.

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By Jena Tesse Fox | August 29, 2011
Amid accusations of mismanagement and subterfuge, the owners of the Waikiki Edition have installed new management, promoting Marriott to seek damages.