Problems for Ritz-Carlton deal - JamaicaObserver.com

Friday, November 20, 2009 8:36 PM

LATEST NEWS:

Business

Problems for Ritz-Carlton deal

By Al Edwards

Wednesday, October 21, 2009

The Ritz-Carlton branded hotel located in Rose Hall, Montego Bay, which is owned by former beauty queen and attorney Michele Rollins, may well undergo a management contract buyout by the Sheila Johnson-led Salamander Hospitality, but any deal will be met by legal impediments which could see the Ritz-Carlton brand tied to the hotel for decades.

It was generally thought that the Ritz-Carlton brand would spell handsome profits for the resort, which boasts one of the best golf courses in Jamaica. The Rose Hall complex has been a labour of love for the Rollins family.

(From left) Ritz-Carlton's Michele Rollins; Stuart Haney, COO of Salamander Hospitality; and Prem Devadas, Salamander's president, last week at the Spanish Ambassador's resident in Norbrook for the celebration of Spain's national day. (Photo: Karl McLarty)

Michele Rollins' late husband, former lieutenant governor of Delaware John W Rollins Snr fell in love with Jamaica, spending millions renovating the Rose Hall Great House. He went on to build two hotels in Jamaica during the volatile 70s, and in August 2000 - a few months after his death - the 427-room resort, The Ritz-Carlton Golf & Spa Resort, Rose Hall was opened to the public. Today Michele Rollins is chairperson of Rollins Jamaica Limited, the holding company for Rose Hall Development Ltd, which has a majority stake in the ownership of the hotel with Ritz-Carlton serving as the hotel's management entity.

Adding to the resort's woes is the downturn in the tourism sector which has seen some of the best brands having to discount heavily in order to stay afloat. It is believed that the Ritz-Carlton management contract is proving rather costly for Rollins and she may well be of the view that another manager may have better fortunes with the hotel and hence she is entertaining overtures from Salamander Hospitality.

Salamander Hospitality LLC was founded in 2005 by entrepreneur and philanthropist Sheila C Johnson, a founding partner of Black Entertainment Television (BET) and luxury resort executive Prem Devadas. Privately owned and operated, it is based in Middleburg, Virginia, just outside Washington. The company owns, manages and develops hotels, resorts and inns that reflect the authenticity and character of their surrounding environment. The company already manages a number of luxury properties along the East Coast, including the Innisbrook Resort and Golf Club in Palm Harbor. For the year 2011 there are plans to roll out the 168-room Salamander Resort and Spa in the foothills of Virginia's Blue Ridge Mountains. Salamander Hospitality specialises in the management of independent luxury hotels and resorts and assisting owners with developing and repositioning their properties.

Speaking with the Business Observer from Kingston last week, president of Salamander Hospitality, Prem Devadas said: "Yes, we are very interested in the Rose Hall property and think we can do a fantastic job with it. There has been no conclusive agreement as yet, but Michele Rollins has been gracious and accommodating."

The chief operating officer, Stuart Haney accompanying Devadas in Kingston, added: "This hotel is magnificent and if a deal can be done it would be mutually beneficial for both concerned parties. It would also be our first hotel in the Caribbean. We will be speaking with Prime Minister Bruce Golding and briefing him on our plans." Earlier this year, Salamander announced that it will be expanding its management services division which focuses on four- and five-star level hotels and resorts. The Ritz-Carlton Golf & Spa Resort, Rose Hall is rated AAA, five-star diamond.

Attempts to reach Michele Rollins for a comment yesterday were unsuccessful.

A major stumbling block to any deal being made is a protracted US$145-million lawsuit against the Ritz-Carlton by the Rollins-controlled Rose Hall Resort LP contending that the resort is grossly mismanaged and, among other things, that the Marriott International-owned Ritz-Carlton has refused to keep the beach clean and adequately maintain the resort's sewage treatment plant.

According to a published release, the lawsuit states: "Instead of a trusting and mutually beneficial relationship, Ritz-Carlton has put Rose Hall through a nightmare of theft, broken promises, gross negligence and outright fraud." The Rollins' have made it clear that they intend to terminate the management contract with Ritz-Carlton on October 1, 2009 and are looking to do business with a new management company, hence Salamander entering the frame.

It has been reported that when the Montego Bay-based resort was opened in 2000, the Ritz-Carlton anticipated profits of around US$20 million by 2003, but Rose Hall Resort claims that it is yet to receive any financial returns since Ritz-Carlton took over the management of the resort. A tourism insider speaking under condition of anonymity said: "The problem has been poor marketing. The resort has been pitched as a corporate-type hotel and it is bleeding to death.

The Ritz-Carlton tends to tether owners to long-standing contracts which are difficult to get out of and herein lies the problem for Rollins. However, she can take comfort from a case last year which saw a jury verdict ruling in favour of the Indonesian owner of the Ritz-Carlton Bali.

The jury found that the Ritz-Carlton breached the amended and restated management agreement; that it was an agent of the owner and breached its fiduciary duties owed to the owner; and that it must pay the owner $383,000 in compensatory damages, $10 million in punitive damages, plus attorney's fees. Mind you, a lot depends on the precise wording of any management agreement. but you can be sure the Ritz-Carlton will give Michele a hell of a fight."

What's your position on mandatory HIV testing for employees in Jamaica?
	I support it
	I don't support it

View Results
Results published weekly in Sunday Finance

Username:
Password: