The owner of the Waikiki Edition hotel filed a lawsuit on May 26 in New York State Supreme Court against Marriott International and Ian Schrager, partners in the development of the Edition brand.
The hotel owner, M Waikiki LLC of San Diego, said in the complaint that Marriott and Schrager "failed to deliver on a promise to create a chain" of Edition hotels. That failure is one reason why the hotel is performing poorly, M Waikiki said.
M Waikiki seeks to terminate the hotel management agreement with Marriott, plus a return of all payments "wrongfully or unjustly" received by Schrager and Marriott.
M Waikiki said in the suit that the defendants were to blame for the Waikiki Edition's "outrageously low occupancy levels and average daily room rates." In the fourth quarter, it said, the hotel's occupancy was 29.5% with an average daily room rate of $220.
In March 2008, Marriott provided the owner with projections of 68% occupancy and a $400 average daily rate during the hotel's first year of operations, M Waikiki said in the suit.
The 353-room Waikiki Edition is in the former Yacht Harbor Tower, a building that was once part of Waikiki's landmark Ilikai Hotel.
Marriott and Schrager said Edition had "agreements in place to open nine hotels in major cities worldwide within a year" when they announced the partnership in 2007, M Waikiki said. It said it signed design and management deals with Schrager and Marriott in 2008 based on that proclamation.
As it turned out, the Waikiki property was the first Edition to open. A second Edition hotel opened in Istanbul earlier this year. Hotels in Mexico City, Barcelona, Miami Beach, Bangkok and London are "coming soon" according to Edition's website.
Besides allegedly misrepresenting their ability to build an Edition chain, M Waikiki in the suit accuses Marriott of failing to effectively promote the hotel before it opened.
"As a result, the hotel opened with precious few bookings -- a standing start that has plagued the hotel ever since," M Waikiki said in the complaint.
M Waikiki's suit also accuses Schrager, considered to be an innovator in boutique hotels, of failing to live up to a promise to be personally involved in the hotel's design.
The lawsuit states that Schrager "abandoned Edition" to start his own competing brands. (Schrager recently unveiled the Public brand and said that the Ambassador East in Chicago would be renamed the Public Chicago.) "Obviously, a dark cloud hangs over the Marriott-Schrager venture, spelling the demise of any legitimate hope of a viable Edition-branded chain of boutique hotels," M Waikiki said in its lawsuit.
Marriott said it was "surprised and perplexed" by the lawsuit and said it planned a "vigorous" defense.
"Across the spectrum, Edition has been one of the most positively received new lifestyle hotel brands of the 21st century," Marriott said in a statement. "Innumerable stories in major global media and customer reviews speak for themselves.
"Edition, and specifically the Waikiki Edition, have generated tremendous excitement, and both we and Ian Schrager are confident of the hotel's and Edition's success."