Hyatt Corporation loses control of Caribbean property after disappointed owners replace management
There’s reflagging by normal means, then there’s reflagging by kicking out the previous operator — usually accompanied by claims of missed revenue targets and mis-management.
Last Monday, a Curacao court denied a bid by Hyatt Corporation and Hyatt Curacao NV to resume control of the former Hyatt Regency Curacao Golf Resort, Spa and Marina.
Following a hearing on Friday, the trial court in Curacao issued an order stating that it would not grant Hyatt the injunctive relief it was seeking. The brand management company lost its bid to resume managerial control of the luxury resort from which it was removed on December 15, 2012.
On December 15, Santa Barbara Hospitality NV removed Hyatt as manager of the resort, renamed the property as the Santa Barbara Beach and Golf Resort, Curacao, and installed Benchmark Hospitality International as the property manager. The owner had terminated its management agreement with Hyatt on November 21, 2012, but Hyatt had reportedly refused to leave the property.
“The owner is pleased that the court denied Hyatt’s extraordinary request to resume control of this property,” said William Brewer, a partner at Bickel and Brewer and counsel for Santa Barbara Hospitality, owner of the resort. “In our client’s view, Hyatt had proven that it was incapable of managing this property in accordance with the terms of the management agreement. The owner will now aggressively press forward in arbitration and all available forums to pursue damages for Hyatt’s alleged breaches of the management agreement.”
Benchmark now manages the 350-room luxury resort. Most employees are retaining their jobs and maintaining their current rate of pay, original start date and accrued vacation. All current reservations and event bookings are being honoured without change.
“We are glad Hyatt’s bid to resume control of the resort was rejected,” said David Maxfield, a representative of Santa Barbara Hospitality. “In the owner’s view, for more than two-and-a-half years Hyatt piled up staggering financial losses and failed to manage this resort in accordance with the terms of the management contract, so we were stunned by Hyatt’s demand that it be permitted to resume control of the property.”
Monday’s court decision was closely followed by the local and the international hospitality community. It follows a week of high-profile developments at the luxury resort and, according to the owner, validates the actions taken to remove Hyatt as manager of the property.
The owner claims that, under Hyatt’s management, the resort has fallen short of budgeted revenue projections by tens of millions of dollars. For example, Hyatt missed revenue projections by almost $12 million in 2011, and occupancy rates that year were 44 percent — approximately 22 percent lower than expected, the owner claims. Both revenue and occupancy are also lower than projected in 2012, according to the owner.
The owner alleges that Hyatt failed in its duties and responsibilities with regard to the service, training and supervision of the resort’s personnel. Hyatt failed in the budgeting and forecasting for the resort, and also the sales and marketing of the property, the owner claims.
A recent report from Smith Travel Research (STR) indicates that over a 12-month period (from November 2011 to October 2012), occupancy at the resort was only 53 percent — compared to almost 80 percent for the properties against which it competes. The average daily room rate at the resort for 2012 is $182.65 — compared to $238.58 for its competitors, according to STR.
(c)2012 the Caribbean News Now (Grand Cayman, Cayman Islands). Distributed by MCT Information Services.