Shelbourne owners hit out at hotel chaos

THE owners of the €1 million-a-room five-star Shelbourne Hotel in Dublin have claimed before the Commercial Court that the hotel is being managed in a shambolic style by an arm of the Marriott international hotel group with “nobody in charge of the ship”.

Denying the claims, the Marriott group has argued it has complied with its obligations under the hotel management agreement for the Shelbourne and the public airing of the owner’s claims are causing “huge damage” to the hotel.

Michael McDowell SC, for Torriam Hotel Operating Co, the Marriott company operating the hotel, said a long and complex management agreement reached between the sides in 2006 provided for any such disputes, including sensitive disputes relating to commercial issues and the adequacy of staff, to be determined by arbitration, not aired publicly.

The Marriott group, an important and well-recognised group, had agreed to operate a Shelbourne Renaissance Hotel, “not the Shelbourne of old” and the Marriott reputation was just as much at issue as that of the owners, he said.

The group also claims the owners have unrealistic expectations of the returns they can expect on their investment in the hotel, bought in 2004 for €145m and reopened last year after extensive refurbishment costing an extra €125m.

Joanna Chugh, a director of finance with Marriott, said it had anticipated refurbishment costs of €40m. The actual investment in the 262-room hotel meant an unprecedented, in her experience, average cost “per key” of €1m.

Mr Justice Peter Kelly will today continue hearing an application by the hotel owners — Shelbourne Hotel Holdings Ltd (SHHL) — for a court order requiring Torriam to give them access to the hotel’s books and records pending the outcome of court proceedings to terminate the 20-year hotel management agreement agreed between them and Torriam in 2006.

SHHL claims its auditors have identified a “systemic breakdown” in the financial controls at the hotel due to “serious mismanagement” by Torriam resulting in alleged significant direct financial loss to them.

Torriam denies any default has occurred justifying termination of the management agreement and has brought its own motion for a stay on the SHHL application so the dispute may be referred to arbitration under the management agreement.

Opening the application for the hotel owners, Brian O’Moore SC said Marriott’s own version of events indicates the “shambolic style of management” of the hotel and the evidence indicated Marriott was responsible for the “operational chaos”.

He said figures presented by Marriott at meetings with owners had no basis in reality.

In an affidavit, John Sweeney, a director of SHHL, said his company had been told by Torriam the hotel sustained losses of €65,309 for the year ending December 2007 when it had earlier indicated a net profit of €1.4m. SHHL was also concerned, due to the actions of Torriam, it may have unaccounted for VAT liabilities to Revenue.