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The Modern Hotel or The Edition Waikiki in transition

Marriott against Aqua Hotel management war continues in Waikiki

Sep 03, 2011

As reported by the Hawaii Reporter the new management company of the Modern Hotel recently known as the Waikiki Edition has had its spa and liquor licenses suspended - at least temporarily.

The Star Advertiser reports Owners of the Modern Honolulu,have temporarily closed the property's signature nightclub Crazybox following a trademark dispute.

The nightclub's closure is the latest development in a power struggle between hotel owners M Waikiki LLC and Marriott International. M Waikiki, made up of about 75 investors, dismissed Marriott as property manager during a 2 a.m. Sunday raid on the hotel and appointed Modern Management Services, an affiliate of Aqua Hotels & Resorts, to run the property.

Early Sunday morning, the owners of the 335-room luxury hotel, M Waikiki LLC, threw out the Marriott International management company, changed the locks and renamed the hotel to The MODERN Honolulu.

Later that morning, guests and hotel staff were informed by the new management firm, Modern Management Services, an affiliate of Aqua Hotels & Resorts, that its management is taking charge of the elite harbor front property.

Spa workers are off the job until the hotel gets a new spa license.
City regulations say no alcohol can be until a new license is issued under the new management name.

M Waikiki LLC Spokesperson Russell Pang said the hotel is addressing the licensing problem.

He added: "The hotel is in the process of obtaining new licenses under the new management company. The spa employees have been offered the opportunity to reapply. The MODERN concierges are assisting guests with other comparable spa alternatives in the interim. There are no other permits that would need to be renewed."

There seems to be a bit of confusion however among staff.
Employees told Hawaii Reporter that the City Liquor Commission informed them that their required server cards are no longer valid as of Thursday morning and therefore they could not serve alcohol legally without being fined.
Last night, a Hawaii Reporter intern was able to obtain a Mai Tai for $11 in the hotel lobby bar. The bartender told our intern that the company had not lost its license.

Meanwhile , KITV reports that hotel is giving away alcoholic drinks earlier in the evening.

Employees said hotel officials met with the city liquor commission at 4:30 p.m. yesterday to resolve the issue.

(Update: Spokesperson Russell Pang said on Friday that there was confusion over the issue because the license to serve alcohol was granted temporarily at 7:30 p.m. and before that, drinks were given away. Afterward the hotel went back to charging for drinks.)

But while the liquor and spa licensing problems in the luxury hotel with five bars, a nightclub and a restaurant is problematic, this isn't the only trouble the owners and new management company face.

Employees are in turmoil, largely because of the shocking way they say the transition was handled. Aqua Hotels took over the property at 2:30 a.m. on Sunday. Employees were all gathered in a large ballroom to hear the news.
“It was a very hostile, aggressive take over. It was very scary. It felt like a coup,” said one employee. "We were told to give them our Social Security numbers and personal information… all this to people we don’t know.”
Another employee said "I was told if I didn't go to the ballroom that Sunday, I would be escorted off property. I've talked to some other employees on property and they said many of our personnel files marked "EDITION confidential and proprietary" have been rummaged through by Aqua."

So far, 220 of 275 employees have been rehired.
A Facebook page has been started titled “Save the Waikiki Edition” in which many residents and guests are showing their support for the Edition and Marriott International.

However, some are pleased with Aqua Management gaining control of the property and believe that Marriott International was not doing their job in promising a unique experience to guests.

“I stayed at the Edition for two weeks when I first moved to Hawaii. Our room was not ready by check-in time, but four hours later they finally told us we could go to our rooms. The whole experience was a nightmare and there were a myriad of problems. I feel that perhaps the hotel will thrive under Aqua,” said former guest John Marnell.

Marriott International Inc., which had been the manager of what was known as the Edition hotel in Honolulu, said that the Chapter 11 filing by the owner on Aug. 31 was a “self- destructive step that will ultimately involve the destruction of significant value.” M Waikiki LLC, the owner, filed bankruptcy to prevent Marriott from retaking management pursuant to a temporary restraining order signed by a state court judge in New York just before the Chapter 11 filing.

As the story is told by the owner, which renamed the property Modern Honolulu when installing new management on Aug. 28, Marriott had “mismanaged” the 353-room hotel since opening in September 2010. In the first 10 months, the net operating loss was $8.4 million, the owner said, followed by a projected $1.9 million loss for the remainder of 2011.

Saying in bankruptcy papers that Marriott’s performance was “abysmal,” the owner started the state court lawsuit in May to terminate Marriott’s management agreement. Marriott filed a motion to dismiss the suit in July. Without authority from the state court, the owner terminated Marriott’s management contract on Aug. 28 and removed Marriott personnel from the premises, the former manager said in court filings.

Back in state court on Aug. 31, Marriott obtained a temporary restraining order directing the owner to reinstall Marriott as manager and return confidential information. The Chapter 11 filing, according to the owner, prevented Marriott from enforcing the order.

Yesterday Marriot filed a motion to modify the so-called bankruptcy automatic stay. Stopping short of asking the bankruptcy judge to return Marriott to management, the former manager is seeking to enforce only the portion of the state court order requiring the owner to return Marriott’s software, customer lists, and other confidential information.

Yesterday the owner filed papers in bankruptcy court to terminate Marriott’s management agreement, in case it wasn’t validly terminated before bankruptcy.

The hotel is now being managed by Aqua Hotels & Resorts, which Marriott characterized as a competitor.

The owner previously said it would use Chapter 11 to “reaffirm” Marriott’s termination. The owner’s statement also said the owner will seek tens of millions of dollars in damages from Bethesda, Maryland-based Marriott. In Marriott’s statement late yesterday, the former manager said it would seek tens of millions of dollars in damages from the owner.

The bankruptcy petition said assets and debt both exceed $100 million.

The case is In re M Waikiki LLC, 11-02371, U.S. Bankruptcy Court, District of Hawaii (Honolulu).

Marriott against Aqua Hotel management war continues in Waikiki

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