As I reported a couple of weeks ago, the Morimoto Waikiki is closing on December 8, 2016. The reasons for the closure was, and continues to remain unknown to the public. But some additional details have recently come to light, and it’s interesting. Especially when you consider the relationship of the overall Modern Honolulu and Morimoto Waikiki.
According to the Pacific Business News, Morimoto Waikiki has a licensing agreement with The Modern Honolulu, not a lease agreement. Whether the licensing agreement is expiring or is being terminated hasn’t been disclosed. The article states that the all restaurant staff will be retained, and that the restaurant will remain open. The restaurant will operate under a new concept.
Morimoto Waikiki opened with the Modern Honolulu back in October 2010. Only, the property wasn’t always known as The Modern Honolulu. As you may remember, the property was known as the Waikiki Edition. It was the first Edition property to open under the then new Marriott brand. Less than a year later, though, the property’s owners, M Waikiki LLC, conducted a hostile takeover. They replaced Marriott’s management in the middle of the night, installed their own, and change the property’s name to The Modern Honolulu.
The reason for the dramatic turn of events was the property owner’s dissatisfaction with the property’s performance. They claimed Marriott didn’t do enough to market the property. In it’s first year in operation, the Waikiki Edition lost around $7 million, according to its owners. I’m not familiar hotel ROI, but the property owners’ argument seemed a bit weak. Does a hotel real reach profitability within the first year of operation? Especially since the brand was new. The Waikiki Edition was the first Edition hotel to open after all. And the economy was a bit weak at the time, too. Toss in the fact that the property is at the beginning of Waikiki, far from many of the attractions and away from the beach, and it’s easy to see why the property struggled. Especially since pricing was and continue to be on the higher side.
There’s no relationship between the two licensing agreements. But, it is interesting that the property owners seem to bring in big names to draw attention to the property and then cut them. Perhaps the property owners feel like The Modern Honolulu has enough notoriety now that it doesn’t need to ay licensing fees to use big names anymore. The property has kind of built a reputation of being sort of a luxury party hotel. Many reality TV shows use the place when they’re in town, and it’s the venue of choice for events like Bacardi and San Lorenzo pool parties during the summer.
yes you are not familiar with hotel roi. or the law of contract.
losing 7m in the first year is unheard of.
maybe you dont make much money the first year, but you certainly are not supposed to lose even more, at a tune of 7m!
these management agreements will not allow the owners to just have a “hostile takeover” as you call it. marriott failed to deliver on its promises and so the owner were legally entitled to throw marriott out. if the owners breached the contract, marriott would sue its ass off. obviously nothing of the sort happened.
let me tell you marriott is pretty well protected in these management agreements. you cant just kick them out like that and think there are no concequences. there has to be massive failure by marriott to trigger this event. for the owners to be able to do that really says a lot about how marriott failed in the hotel’s management.
Thank you for your insight, woooo.
Yes, hotel ROI is completely foreign to me, though the contractual obligations weren’t spelled out in any articles and the best I can do is speculate. The $7 million figure was given by the property owners, and should be taken with a grain of salt in my opinion. Pacific Business News does report that the new management company, locally based Aqua Hotels & Resorts did play a hand in the events. According to the article, Aqua offered to manage the property for a “below-market base management fee of 2% of gross revenues, which is half of Marriott’s 4% base management.”
At the time of the takeover, Marriott and M Waikiki were in litigation about the property’s performance and release of contract. However, proceedings had not yet finished at the time of the takeover. Marriott did end up filing suit against Aqua Hotels & Resorts, whom eventually settled with Marriott for an undisclosed amount. While we don’t know the actual payout, it is rumored that Marriott was paid $20.7 million.