The Shelbourne HotelTHE owners of one of the country's most prestigious hotels hired investigators to pose as customers and report back on how the premises was being run amid concerns that it was being "seriously mismanaged".
Shelbourne Hotel Holdings Ltd revealed yesterday that it had spent a staggering €125m on renovations to the world-famous Dublin venue over the past three years, on top of the initial purchase price in 2004, which is estimated at €140m.
It has emerged that the owners, who include property developers Bernard McNamara and Jerry O'Reilly, have since paid for an investigation team and auditors to carry out probes at the hotel because they believe it is being "seriously mismanaged" by an arm of the Marriott International group.
The Commercial Court heard yesterday that the owners want to terminate a 20-year contract with the management company, Torriam Hotel Operating.
The contract was signed two years ago, with the hotel re-opening its doors six months later as the largest five-star hotel in the capital, with features including a 24-carat gold coated ceiling in the lobby and the stunningly-refurbished Horseshoe Bar.
But Brian O'Moore, legal counsel for the owners, said yesterday that, if the level of alleged mismanagement identified to date remained uncorrected, the hotel's reputation and iconic status as 'The Grand Old Lady of the Green' would be tarnished.
Breakdown
The owners claim their auditors identified a "systematic breakdown" in the financial controls at the 265-room hotel. Among the concerns was the resignation of the hotel's finance director last June, to be replaced by a Marriott "task force".
Mr O'Moore said that the auditor's initial assessment was that the financial control and accounting functions within the hotel were "weak", and a Marriott representative admitted to the auditor that the system breakdown at the hotel was the worst she had ever seen.
After the auditor's work, the owners were informed by Torriam that the hotel had sustained losses of €65,309 for the year to the end of December 2007. The defendant had earlier indicated a net profit of over €1.4m for the same period.
In an affidavit before the Commercial Court yesterday, one of the hotel's owners, oil magnate John Sweeney, said that no expense had been spared in refurbishing the Shelbourne prior to the reopening. The costs were put at €125m. They had previously been estimated at €83m.
Sense
Mr Sweeney said that the owners had negotiated the 20-year agreement with Torriam in August 2006, based on it being a prudent operator, but subsequent meetings with the management group had seen Torriam continuously defend operational decisions which made "no sense".
Among the areas of concern to Mr Sweeney was that wedding business was not being targeted by management, and that margins for 2008 were "looking no better" than 2007.
The owners later tried to get details of the number of people using the restaurant and bars at the hotel but never received "straight answers", he said.
The court was told that the probe, by an investigation company posing as customers, had pointed up a number of problems relating to receipts, reservations, restaurant, room service, functions, bar and front desk service.
Now the owners want to terminate the agreement with the management company and say they are not interested in Torriam's €1.2m offer to resolve the dispute.
Torriam denies any default of agreement has occurred justifying termination of the management agreement, and is seeking a stay on the owners' application for access to the books and records -- so the dispute may be referred to arbitration.
