A co-owner of the Capella Pedregal seized management of the Cabo San Lucas luxury resort on Nov. 3, a move that was declared illegal by resort operator Capella Hotel Group.
Capella said ownership was in breach of contract when it took over the 96-room property at the tip of Mexico's Baja California peninsula.
Capella Pedregal is closed and has been under construction to repair damage from Hurricane Odile on Sept. 14.
Representatives of CarVal Investors, an adviser to one of the hotel owners, entered the property at 6:30 p.m. on Nov. 3 and informed Capella's management team that they were taking over the hotel, without any prior notification, according to a statement from Capella.
"Without any official notification or show-of-cause letter from the representatives of CarVal Investors, we were informed that management was being instructed to leave the property — this despite Capella Pedregal achieving record-breaking occupancy rates and revenues in the last two years," said Horst Schulze, Capella's chairman and CEO.
"We believe whatever allegations they have are baseless, and we intend to promptly seek judicial recognition of our contractual rights."
Schulze said Capella has a binding contract and that "CarVal has violated this agreement without reason in a highly unprofessional manner."
"This action by CarVal is part of an ongoing dispute between the two owners of the asset and does not reflect on the operation/management of the property by CHG, which by all measures has been highly successful, despite this difficult situation and a challenging economic environment. It is unfortunate that we have been caught in the middle," Schulze said.
On Nov. 4, the resort was renamed the Resort at Pedregal. It issued a release that said the resort has ended its affiliation with the Capella brand and is now headed by interim manager Bob Holland, former general manager of the Charles Hotel in Boston.
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CORRECTION: CarVal Investors is an adviser to one of the hotel owners but doesn’t have a stake in Capella Pedregal.