THE OWNERS of the five-star Shelbourne Hotel in Dublin have claimed before the Commercial Court that the hotel is being managed in a "shambolic style" by an arm of the Marriott international hotel group with "nobody in charge of the ship".
The Marriott group has argued it has complied with its obligations under the hotel management agreement for the Shelbourne and the public airing of the owner's claims are causing "huge damage" to the hotel.
Shelbourne Hotel Holdings Ltd (SHHL) is owned by a consortium of businessmen comprising John Sweeney, Bernard Doyle, Bernard McNamara, Gerry O'Reilly and David Courtney.
Michael McDowell SC, for Torriam Hotel Operating Co Ltd, the Marriott company operating the hotel, said a long and complex management agreement reached between the sides in 2006 provided for any such disputes, including sensitive disputes relating to commercial issues and the adequacy of staff, to be determined by arbitration, not aired publicly.
The Marriott group, an important and well-recognised group, had agreed to operate a Shelbourne Renaissance Hotel, "not the Shelbourne of old", and the Marriott reputation was just as much at issue as that of the owners, he said.
The group also claims the owners have unrealistic expectations of the returns they can expect on their very significant investment in the hotel, bought in 2004 for €145 million and reopened last year after extensive refurbishment costing an additional €125 million.
Joanna Chugh, a finance director with Marriott, said it had anticipated refurbishment costs of €40 million. The actual investment in the 262-room hotel meant an "unprecedented" average cost "per key" of €1 million.
Mr Justice Peter Kelly will today continue hearing an application by the hotel owners - SHHL - for a court order requiring Torriam to give them access to the hotel's books and records pending the outcome of court proceedings to terminate the 20-year hotel management agreement agreed between them and Torriam in August 2006.
SHHL claims its auditors have identified a "systemic breakdown" in the financial controls at the hotel due to "serious mismanagement" by Torriam, resulting in alleged significant direct financial loss to them.
Torriam denies any default has occurred justifying termination of the agreement. It has brought its own motion for a stay on the application so the dispute may be referred to arbitration under the management agreement.
Opening the application, Brian O'Moore for SHHL said Marriott's version of events indicates the "shambolic style of management" of the hotel and the evidence indicated that Marriott was responsible for the "operational chaos".
It was an "unedifying aspect" of the case that Marriott was seeking to "throw to the wolves" and blame problems on the hotel finance director, who took sick leave in spring 2008 and resigned in June 2008.
It had also made negative remarks concerning communications with another employee in the finance department, who had taken leave to look after a seriously-ill relative.
Mr O'Moore said figures presented by Marriott at meetings with owners had no basis in reality and the evidence showed Marriott had been unable to find invoices and figures.
Marriott's claims of unrealistic expectations by the owners had no relevance to the proceedings.
In her affidavit, Ms Chugh said a Marriott area director of finance of UK South had become concerned during a routine visit to the Shelbourne in February 2008 about issues with accounts receivable.
A Marriott representative had in April 2008 discovered significant deficiencies with the hotel's financial controls, accounting and bookkeeping, Ms Chugh said.
Given this and a lack of adequate staffing in the finance department, a taskforce was established.
Because the entire senior finance team of the hotel was unavailable to the taskforce, there was no alternative but to completely reconstitute the books for 2007, she said.
In an affidavit, John Sweeney, one of the owners and a director of SHHL, said the owners, following meetings with Marriott, became concerned that margins did not seem to be improving over 2007 and 2008 was "looking no better".
