Lessons From the Fight Over the Waikiki EDITION

Naturally, journalists love a juicy story, and there probably hasn’t been one as juicy in the hotel industry as the fight over the Waikiki EDITION. In the six weeks, the story has had more twists and turns than a roller coaster at Cedar Point amusement park. In case you missed it, which means you haven’t been exposed to any trade or consumer business media coverage for a long while, here’s a brief recap of events:

In late August, M Waikiki LLC, owner of the 353-room boutique hotel, ousted Marriott as operator in a middle-of-the-night coup. The owner claims the hotel, only the second one in Marriott’s fledgling EDITION chain of boutiques, has grossly underperformed since it opened 11 months ago. The owner installed Aqua Hotels as the new manager and changed the name of the hotel to MODERN Honolulu. Marriott quickly got a judge in New York to reinstate the company as operator, only to be cuckolded by a bankruptcy filing by the owner. That stalled Marriott’s efforts to retake the hotel, leaving Aqua as operator and MODERN as the name. Presumably, it will take prolonged court proceedings and/or contentious negotiations before the dispute is finally settled.

While it’s perversely interesting to watch other companies air their dirty laundry in public, there’s a lot more to the story in the form of several lessons for hotel owners and operators alike.

Not too long ago—just a few years, in fact—it was rare to hear about legal battles between lodging owners and operators. They happened, for sure, but typically the skirmishes didn’t play out in the public eye or in the media. Since then, a few smart and very aggressive lawyers discovered the leverage media scrutiny can bring to an intense situation. Last year, Four Seasons Hotels had a similar battle with the owner of a property it managed in Carlsbad, CA. That dispute also received nearly non-stop media coverage and Four Seasons ended up relinquishing management control of the hotel. The current situation in Hawaii has the potential to become a black eye for Marriott, which is usually regarded as the most stable, most reliable brand family in the industry. No matter who wins the battle of Waikiki, the company will have a challenging time promoting the EDITION brand to other developers and owners.

If you’re an operator—no matter your expertise, track record or pedigree—don’t think you’re immune to being thrown out on your ear if you don’t live up to the hopes, projections and promises you generated for the hotels you operate. On the other hand, owners shouldn’t be too quick to pull the trigger if their properties aren’t living up to each and every quarterly budget forecast. Changing management of a hotel isn’t always the answer to a performance problem and many times can create more issues than it solves. No matter, be prepared to read online or in print about other future battles over the control of hotels.

It’s a dangerous new world in the hotel business.

Ed Watkins is editor of Lodging Hospitality. He can be reached at ed.watkins@penton.com or 216-931-9278.


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