Marriott lashes back at owners of Modern Honolulu

Owners of the 353-room Modern Honolulu, formerly the Waikiki Edition, have taken a "desperate step" by filing for bankruptcy reorganization, Marriott International Inc. said Thursday.

Hotel owner M Waikiki LLC filed for bankruptcy Wednesday to prevent Marriott from resuming duties as manager of the hotel. M Waikiki kicked Marriott managers out of the hotel at 2 a.m. Sunday despite Marriott having 29 years left on a 30-year management contract for the luxury hotel.

Marriott obtained a court order Wednesday in New York that would have allowed it to reassume management of the property that afternoon, but the bankruptcy filing by M Waikiki effectively blocked Marriott from doing so.

Marriott said Thursday the bankruptcy filing stopped it from resuming management duties but will not prevent it from suing M Waikiki for "tens of millions of dollars" in damages.

"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," Ed Ryan, Marriott International executive vice president and general counsel, said in a news release. "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."

An official with M Waikiki said the company stood by its earlier statements that it acted within its rights when terminating its contract with Marriott due to "Marriott’s gross mismanagement of the property and violation of its contractual and fiduciary obligations." M Waikiki said the hotel had lost more than $6 million this year.

M Waikiki hired Aqua Hotels & Resorts affiliate Modern Management Services LLC to assume operations of the hotel on Sunday.

Marriott defended its management of the hotel, which opened a year ago. The Waikiki Edition was 67 percent full in July and more than 80 percent full last month, Marriott said.

Smith Travel Research, a hotel consultancy, said the Edition had an average occupancy of 37.7 percent from October to March.

The Waikiki Edition page of the Edition Hotels website remained operational Thursday. Meanwhile, Aqua Hotels & Resorts added a Modern Honolulu page to its own Web portal.