“We are extremely excited about this new opportunity,” said Damian McKinney, principal of M Waikiki LLC, the owner of the hotel. “We believe that Aqua will realize the vision on which this hotel was developed – becoming the leading lifestyle hotel in Hawaii.”
M Waikiki LLC (the “owner”) announced Modern Management Services as the manager of the property following the termination of Marriott International Inc. (“Marriott”) amid allegations 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 plans to offer employment to current hotel staff members, who will maintain their current rate of pay, original start date and accrued vacation.
“Our primary focus is ensuring a smooth transition for employees and guests,” said Benjamin Rafter, president and CEO of Aqua. “Based on our experience in the local hospitality community, we believe The MODERN Honolulu will become the lifestyle hotel in the Islands.”
The announcement of new management comes more than three months after the owner filed a lawsuit against Marriott and boutique hotelier Ian Schrager. According to allegations in the lawsuit, the property opened as the first Edition hotel in late 2010 and, since that time, has suffered from poor occupancy, a brand with virtually no identity, and Marriott’s unwillingness to control expenses. The complaint asserts, “What defendants represented would be a fully supported new lifestyle hotel brand in the Marriott family of brands has turned out to be a nonexistent hotel chain.”
“The owner believes that Marriott has failed in its management of this resort as well as the delivery of the Edition brand concept,” said William A. Brewer III, partner at Bickel & Brewer and lead counsel for the owner. “As a result, our clients brought in new management in the belief that doing so would better protect their investment.”
According to the lawsuit, when the Edition brand of boutique hotels was publicly announced, Marriott’s President and Chief Operating Officer, Arne Sorenson, stated, “Success will be determined by one thing only: how many of these we can open, and how well they perform.”
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.”
Indeed, 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.
Although Marriott has attempted to deflect responsibility for the hotel’s poor performance, the hotel’s competition has consistently outperformed the property. 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.
The MODERN Honolulu is a unique luxury hotel located on the Island of Oahu, within walking distance of world famous Waikiki Beach, the Hawaii Convention Center, Ala Moana Beach Park and Ala Moana Shopping Center. All hotel facilities, including world-renowned Morimoto Waikiki, the Lobby Bar, the Bar at Sunrise Pool and the nightclub remain open under the hotel’s new management. Hotel guests also have uninterrupted access to the property’s full-service spa, state-of-the-art fitness center and retail shop.
Visit The MODERN Honolulu at www.themodernhonolulu.com.
About M Waikiki LLC: M. Waikiki is a Hawaii limited liability company with its principal place of business located in San Diego, California. It is a special purpose entity, having approximately 75 indirect investors, which was formed to acquire the Hotel.
About Modern Management Services and Aqua Hotels & Resorts: Modern Management Services is an affiliate of Aqua Hotels & Resorts, a full-service management company founded in 2001 by Hawaii hotelier Mike Paulin. Currently representing contemporary hotels and resorts located on Oahu, Maui, Kauai, Molokai and Lanai, Aqua offers full-service resorts, stylish beach boutique hotels.
Headquartered in Waikiki, Aqua became Hawaii’s first employee-owned hotel company in 2008 when it executed an Employee Stock Ownership Plan. For more information on the company and individual hotels, visit www.aquaresorts.com or call 1-808-943-9291.
About Bickel & Brewer: Founded in 1984, Bickel & Brewer has earned a reputation as one of the most successful law firms in the United States practicing exclusively in the field of complex commercial litigation and dispute resolution. With offices in New York and Dallas, Bickel & Brewer represents a wide spectrum of industry leaders – from entrepreneurs to Fortune 500 corporations – facing the most challenging of legal issues. Visit Bickel & Brewer at www.bickelbrewer.com.
Submitted by Russell Pang, Communications Pacific, on behalf of Aqua Hotels & Resorts