Anne Gibson

Property editor of the NZ Herald

French set out to save troubled city hotel

Behind the name change at the former Westin is a fierce fight Graham Wilkinson expects Accor will make the hotel a big success. Photo / Dean Purcell
Behind the name change at the former Westin is a fierce fight Graham Wilkinson expects Accor will make the hotel a big success. Photo / Dean Purcell

A five-star Auckland waterfront hotel will be given its third name in as many months when the hotel re-opens next week, as French managers step in where Americans failed.

Company receivership, room owners battling the hotel's developer and a white knight stepping in to resolve issues are part of an unusual scrap at the former Westin Lighter Quay Hotel.

Positioned between the Wynyard Quarter, Lighter Quay and the Viaduct Basin, the hotel seemed to have everything going for it.

But so much has gone wrong that it is being seen as a model of how not to combine development with hospitality.

On July 29, American-headquartered Starwood Hotels and Resorts departed. From next week, the world's biggest hotel operator, French-headquartered Accor, takes over and adds 130 of the 172-room hotel to its portfolio.

Developed by Nigel McKenna's Melview, the hotel has gone through two name changes recently; the Westin became Viaduct Harbour Hotel in July and will next week be relaunched as Hotel Lighter Quay.

Behind the name change is a fierce fight. Room owners demanded payments and became so disenchanted that they split away from Westin and carved out their own, separate lodging business from July 1. Accor will operate their rooms.

The battle led to an unprecedented situation: at a Westin desk, smiling hotel staff were selling a hotel room for $600/night but 10 steps away at the splintered part of the renamed Hotel Viaduct Harbour, rivals were selling an identical room for just $99 a night, albeit without all the services.

The hotel opened in mid-2007 with a hiss and a roar, promising a no-tolerance no-smoking policy and promoting its luxury Heavenly Beds. But it lasted only four years.

Stepping into the breach, Paul Richardson, Accor vice-president for New Zealand and Fiji, said it was "disappointing to see it not operating at its full potential" and spelt out how only some of the hotel's facilities would be under his firm's management.

Accor's contract is for rooms only so to eat, guests will "have the benefit of a wealth of surrounding bars and restaurants for their wining and dining pleasure".

Westin's bar, cafe and restaurant are still in the hands of receivers.

How did this happen?

Last decade, Westin Resorts & Hotels signed up to manage the four-level $90 million 173-room Lighter Quay hotel and were tipped to push up room rates throughout the city.

All seemed to go well. Stars like Pamela Anderson stayed. Golfer Michael Campbell and footballer David Beckham held press conferences there. The Westin hosted diplomatic meetings and fashion launches and major events like Fashion Week nearby swelled numbers.

But behind the scenes, people were deeply unhappy.

To get funding to develop such a big property, McKenna borrowed from Bank of Scotland then got more cash by selling individual titles to rooms, mainly to Singaporean and Malaysian investors, guaranteeing income to pull them in but also embedding himself permanently by creating separate titles to the Westin's bar, cafe, conference area, restaurant, spa and reception, which he then rented back to the room owners at what some in the industry see now as exorbitant rates.

"You'd have needed to have an extremely astute solicitor to read the documents and figure out what the rent was going to be," said Christchurch developer and hotel management specialist Graham Wilkinson, who is a representative of the majority of the room owners.

"Within the [sale and purchase] document, it stated you were going to pay rental but it didn't say what that would be."

Valuers put a price akin to a Queen St trophy on those titles, crucial to Westin's operation and the owners were gutted.

"It just all blew up," Wilkinson said.

McKenna struck financial problems and declared himself bankrupt, his companies went under, owners were not paid and legal action ensued.

By last September, the owners were at loggerheads with KordaMentha receiver Michael Stiassny over the conference/bar/restaurant areas, trying but failing to get control of them.

Stiassny said Westin would be run "at reduced capacity" with 70 rooms, spa, bar, cafe and conference facilities for guests and visitors, blaming the owners for presenting no reasonable offers and saying he had done everything possible to keep all rooms open.

By that stage, investors were owed at least $6.8 million and eventually they bailed, pulling 116 rooms from Westin, leaving the American-owned hotel chain with just over 50.

Poh Kok Tan, Pei Siang Judy Chen and others went to the High Court at Auckland against Lighter Quay Hotel Management last July.

The splintered rooms were marketed as "five-star hotel at two-star rates". Wilkinson said the situation was not ideal right from the start when McKenna established himself in a key role.

"Unfortunately, there has been splintering of hotels around the world, where there are individual owners. It's not uncommon so the major hotel brands won't deal with unit title ownership."

Wilkinson now expects Accor to make the hotel a big success but points out they still have only 130 of the 172 rooms, a situation he hopes will change soon.

So the lesson from all this? Be wary of buying hotel rooms as an investment. Certainly those with guaranteed incomes are only as good as the guarantor.

Wilkinson warns that the Unit Titles Act was never designed to run hotels yet developers used that law as a way to get finance via pre-sales for expensive building work.

Bumpy ride

Hotel Lighter Quay
* Opened in 2007 with American Starwood management.
* Marred by bitter infighting when owners were not paid.
* Starwood left in July "unable to continue" operation.
* From Monday, the hotel opens as part of Accor's MGallery range.
* Accor has 4200 hotels and 500,000 rooms in 90 countries.


- NZ Herald

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