The Ritz-Carlton Palm Beach, one of the island’s three luxury-brand five-diamond hotels, will get a new name and management company July 1, in a takeover by the property owners that punctuates a two-year court battle.
After 22 years as the Ritz-Carlton, RC/PB Inc. will rename the landmark Manalapan hotel the Eau Palm Beach Resort & Spa, according to a news release issued Tuesday. Owners won the right from a judge to terminate the management contract with Ritz-Carlton Hotel Co. and Marriott International Inc., court documents show. But now it faces a counterclaim by Ritz-Carlton for breach of contract, according to a news release from that company.
Employees will get some relief during the upheaval as the owner said it will keep as many of them as possible.
“We anticipate an efficient and smooth transition that will carry on the tradition of luxury and service our guests, employees and the Palm Beach community have come to expect from our hotel,” said Eva H. Hill, president of Britannia Pacific Properties, which is affiliated with the ownership.
But that doesn’t alleviate concerns by tourism industry officials that this luxury destination is losing one of its premier names. Only the The Breakers and the Four Seasons hold the elite five star ratings like the Ritz-Carlton, and the loss of the Ritz name and Marriott booking system will reduce the number of international eyes on Palm Beach County.
“Five diamonds and five stars is very difficult to attain. It’s so rare these days,” said Peter Ricci, director of the hospitality management program at Florida Atlantic University.
Losing the Ritz-Carlton will hurt marketing, said Dave Semadeni of the Palm Beach County Hotel & Lodging Association. “The name of the Ritz-Carlton has always meant quality and service.”
The fight for the past two years has been over management fees. RC/PB Inc., which bought the Ritz-Carlton property in 2003, sued Marriott and Avendra Inc. two years ago claiming they were skimming profits through fees and kickbacks, according to court documents.
Ritz-Carlton said in a statement Tuesday that the property was forecast to make millions in net profit in 2013.
Still, the owners sunk $120 million into the property since buying it including a renovation in 2007 that closed the hotel for several months.
“When you join a major brand you’re going to pay a series of fees that does cut into your bottom line,” Ricci said.
A circuit judge last month agreed with the owner’s legal argument that they could terminate the management agreement. The judge determined the operating contract is a personal services contract, which cannot be enforced under Florida law. Marriott International Inc., which owns the Ritz-Carlton brand, had argued that the owners could not terminate the management contract.
Under the contract, RC/RB can drop Marriott’s services if the hotel fails to meet set net operating income levels for two years and falls below performance of other specified hotels, according to the lawsuit.
Ritz-Carlton “categorically refuted” the owners’ claims of performance shortfalls, saying in a news release that it “has always passed the contractual performance test.”