It's hard to say who's winning the battle raging in Oahu over the Modern Honolulu/Waikiki Edition, but you'd have to say Edition, the new lifestyle brand from Marriott International, is the big loser.
A quick recap: Last Sunday, the owners, M Waikiki LLC, took control of the hotel and retained Aqua Hotels & Resorts to manage it under the new name, Modern Honolulu. On Wednesday, a New York Supreme Court judge ordered the owners to reinstate Marriott management at the property. But later that day, the owners filed for Chapter 11 bankruptcy, allowing them to retain control.
Late yesterday, a release from Marriott called the bankruptcy move “self defeating.”
“While we are astonished at such a self-destructive course of action, we of course respect the law and the fact that a bankruptcy filing freezes any other legal orders for the time being,” said Ed Ryan, Marriott executive vice president and general counsel, in the release. “It is clear that this was a desperate step by the owner and legal advisors to circumvent the New York court's order returning the hotel to our rightful management and control. They will obviously stop at nothing in the effort to escape from the contractual obligations they made to us when they signed the management agreement.
“We will vigorously pursue tens of millions of dollars of claims for damages to the brand and our company in bankruptcy court over time.”
Damages to the brand are the last thing Marriott needs as it tries to grow Edition. When it was launched in 2007, the goal was to have 100 properties open within 10 years. Now that the Waikiki Edition is, at least temporarily, no more, the current portfolio sits at a whopping one (Istanbul). The industry and economic slowdowns haven't helped, and the continued lack of credit has made funding such a big-ticket project difficult. The brand's co-creator, Ian Schrager, is still on board, but he's also now developing his own brands, which will compete somewhere in the neighborhood of Edition's luxury lifestyle segment.
The publicity coming out of Honolulu may not be the end of the brand, but any developer currently thinking about investing in Edition has to be asking some serious questions right now. Marriott's not one to give up easily, and the Wall Street Journal reports the lodging giant is investing $400 million of its own money to grow the brand.
It's usually not a wise move to bet against Marriott, but this time the odds are long.