Viceroy's latest blow puts its Middle East future in doubt

The Viceroy Yas Abu Dhabi was managed by Viceroy Hotel Group until the hotel's owner ejected them and inserted Marriott. The hotel is slated to convert to a W. Photo credit: Viceroy Hotel Group

Viceroy Hotel Group is having a tough go of it in the Middle East. This week the luxury hotel brand was reportedly booted as operator of what is currently branded the Yas Viceroy Abu Dhabi by the hotel's owner Aldar Properties PJSC. They, in turn, inserted Marriott International as manager effective July 1. The news is a double whammy for Viceroy, which, last year, was tossed out as operator of the Viceroy on Dubai's Palm Jumeirah by the hotel's owner Five Holdings. That case is currently in litigation.

In the case of the Yas hotel, reports are that it will be reflagged under Marriott's W brand and go through a renovation. It would be the first W in Abu Dhabi.

A statement from Aldar CEO Talal Al Dhiyebi was bland, though does artfully take a swipe at Viceroy's operational prowess: "Appointing Marriott International to manage the operations of our Yas Island hotel supports our strategy to employ the most reputable international operators and reflects our active approach to the management of our portfolio."

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For its part, Alex Kyriakidis, Marriott International president and managing director, Middle East and Africa, offered an equally insipid comment: "We are delighted to work with Aldar to introduce W Hotels on Yas Island, bringing a new dimension to the luxury and lifestyle hospitality offering on the iconic landmark. Marriott International and Aldar share a similar vision for this project and we look forward to infusing the energy and innovative mind-set of the brand into a vibrant destination such as Yas Island."

Viceroy came on as operator of the Yas property back in 2011, marking its entrance into the Middle East, a region seemingly suited to Viceroy's brand of sexy luxury. 

Yas is an island off Abu Dhabi and development there was started by Aldar around 2006. Aldar owns seven hotels on the island under various brands including Radisson Blu and Crowne Plaza. 

Ironically, Viceroy's dismissal from the Yas Island property comes at the same time a year ago that it was relieved of managerial duties from the Viceroy on Dubai's Palm Jumeirah. In 2013, Viceroy signed a management agreement with the hotel’s owner, an affiliate of Five Holdings. 

Four years later, on June 19 of last year, Five removed Viceroy from the hotel, with CEO Aloki Batra saying at the time: "We believe now is the right time to disrupt the hospitality industry. The people who actually provide a hospitality experience never receive the real benefits while most of the commercial benefits are taken in most cases by operators. This needs to change. There needs to be a much more equitable distribution and we will be introducing this in our hospitality vertical immediately to ensure our philosophy is executed from the heart."

The hotel now is marketed as the FIVE Palm Jumeirah Dubai.

Viceroy contends it was illegally terminated as manager of the Viceroy Palm Jumeirah Dubai.

Viceroy, for its part, did not go away without a fight. A few days later, it obtained an injunction from the DIFC Courts—an independent English language common law judiciary, based in the Dubai International Financial Centre (DIFC) with jurisdiction governing civil and commercial disputes nationally, regionally and worldwide—prohibiting Viceroy Palm Jumeirah Dubai owner from preventing Viceroy to manage the hotel.

Bill Walshe, CEO of Viceroy Hotel Group, said in a statement at the time: "The court’s order requires, among other things, Viceroy’s name, signage and branding to be reinstated at the hotel. Our priority remains to work with our outstanding hotel colleagues to ensure continuity of service and consistent delivery of a guest experience in keeping with the Viceroy ideology. We will continue to work strenuously with our legal team to ensure we achieve this."

Five disputed the validity of the injunction, claiming DIFC Courts was not the correct jurisdiction to grant and enforce such an injunction. 

In March, a Los Angeles court threw out claims by Five Holdings that Viceroy “mismanaged” the hotel, alleging financial fraud.

"We are pleased that the Los Angeles Superior Court held that this lawsuit has absolutely no merit," a spokesman for Viceroy said at the time.

At around the same time Five Holdings ejected Viceroy, it established a $571-million real estate investment trust that included the Viceroy Dubai Palm Jumeirah and the then upcoming Viceroy Dubai Jumeirah Village, which was suppose to open this year. There is no mention of the property on Viceroy's website. 

With litigation ongoing, Viceroy is not currently positioned at the Dubai Palm Jumeirah. Viceroy's website describes the situation thus:

We regret to inform you that in June 2017 Viceroy was wrongfully terminated as the rightful manager of the Hotel and removed from the property.  
Viceroy has an injunction from the DIFC Court ordering that the owner of the Hotel must not interfere with Viceroy’s exclusive authority to manage the Hotel, and must restore the Viceroy branding. 
The owner is challenging the validity and enforceability of the injunction in the Dubai Courts and has refused to rebrand the Hotel or to provide Viceroy with access to the Hotel. 
It is Viceroy’s position that the Hotel has and continues to be wrongfully rebranded as Five Hotel, a brand which has no relationship whatsoever to Viceroy.  
Viceroy regrets the inconvenience this situation has caused and is continuing to cause its guests.

In the circumstances Viceroy is pursuing all legal courses of action available to it.

Disputes between hotel owners and management companies though not frequent do happen, and can be dramatic. One of the most sensational happened in August 2011 when the owner of the then Waikiki Edition in Hawaii attempted to remove Marriott as the operator citing poor performance of the asset. M Waikiki had filed a lawsuit against Marriott three months prior claiming the hotel had "been a failure due to gross mismanagement and Marriott's inability to successfully launch the Edition brand."

Then, literally under the cover of night, the hotel's owner descended on the hotel and physically ejected Marriott employees from the premises, installing their own management and changing the signage and locks. At the time of the incident, Arne Sorenson, then Marriott's COO, told The Wall Street Journal that "This is a deeply unfortunate, regrettable and illegal event. The owner and its partners raided the hotel literally under cover of night, forcibly taking over the property and threatening our employees with dismissal unless they immediately agreed to a change of management. We will aggressively and vigorously pursue all remedies against the owner and its partners in this illegal act, which was completely and blatantly in violation of Marriott's contractual agreements."

Marriott subsequently countersued and in July 2012 the owner of what was renamed The Modern Honolulu settled, paying Marriott an undisclosed sum in return for Marriott dropping its lawsuit.