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Auckland’s newest hotel will open for business on July 1, offering luxury five-star rooms on Auckland’s ritzy waterfront at bargain basement, two-star prices starting from $99 a night.

It will be a hotel within a hotel. “Hotel Viaduct Harbour” will be a lean operation located in the same building as the five-star Westin Auckland Lighter Quay hotel, but controlling two thirds of the rooms.

It results from the frustration of the owners of 116 of the 172 units in the building at not being able to reach agreement about how the hotel’s income and expenses are to be apportioned, despite a year of negotiations. Fed up with meagre returns and losses ever since the hotel opened in 2007, and determined to make a return from their investments, the owners are committing their rooms to the new, two-star hotel venture.

The prestige waterfront property was developed by Nigel McKenna on the basis that the rooms would be offered for sale to individual investors and leased back to a McKenna company Lighter Quay Hotel Management Ltd to operate a hotel and be managed under the international Westin brand. Almost all of the rooms were sold but McKenna’s company was put into receivership by the Bank of Scotland International nearly a year ago.

The mainly Singaporean and Malaysian investors who own the majority of the hotel’s rooms have previously reclaimed possession of their rooms through court action. They have also been trying ever since to reach agreement with Receiver KordaMentha as to how to bring their respective assets together and to apportion the expenses of running the hotel and share the income. KordaMentha controls the public areas of the hotel, including bars and restaurants, but less than 60 of the hotel’s 172 rooms.

COMMERCIAL VALUATION APPROACH REJECTED

Investors have put forward various proposals to KordaMentha over the last 12 months, including proposals for an open and transparent market-based assessment of the division of expenses and income by independent, expert valuers, but the Receiver has rejected these previous market-based proposals.

Commercial representative for the owners, Graham Wilkinson says as last minute negotiations with the Receivers over recent weeks have proved fruitless, investors’ patience is exhausted and they are committed to putting their rooms into the new cut-price hotel venture, slashing room rates to attract business and earn income. A recent court ruling confirms that owners are entitled to use their rooms for their own operation if they wish.

Mr Wilkinson has considerable experience with hotels through his hotel management entity Beswick Holdings Limited including being the operator at Queenstown, Hanmer Springs and Wellington hotels. Beswick Holdings has been appointed to run the new cut-price Hotel Viaduct Harbour for the benefit of the investors who have made their rooms available to it.

Mr Wilkinson says investors have had enough and are simple wanting a fair commercial solution. “While the owners we represent received various proposals from the Receiver, all of these involved the Receiver taking an unequal share of the income and owners cannot see how that is fair. The owners have continually offered to purchase, rent or profit share at the hotel provided that the agreement is based on having independent experts determine true market value.

“They feel they their interests have been ignored. Year after year they have not received anything like the promised returns which induced them to invest in the first place. They hoped that the appointment of KordaMentha as Receiver would bring some commercial reality to the situation, but have now lost any hope of that happening, and are taking control of their own destiny.

“They now feel they will be better off by making their rooms available through Hotel Viaduct Harbour, despite the cut-price rates at which the rooms will be let for initially.

“It may seem incongruous to be slashing room rates on the waterfront on the eve of the Rugby World Cup, but that merely indicates how committed the room owners are to start creating income from their investments.

Mr Wilkinson said that at this stage the owners were still prepared to reach agreement with the Receivers but were only interested in a market based resolution.

WILLING TO WORK CO-OPERATIVELY

Mr Wilkinson also said “Westin is a highly respected international brand caught up in a situation which is not of its making, and it can continue to operate those rooms still available to it, and the bars, restaurants and other hotel services.”

Westin’s website shows rooms available at the Westin Auckland Lighter Quay Hotel on July 1 from between $260 and $480 per night compared with $99 a night as the starting price to be offered through the new Hotel Viaduct Harbour.

“We won’t be in the same space as them although all rooms are virtually identical, because we cannot guarantee our guests access to all the hotel’s facilities and services – just our rooms and access to them, hence our much lower prices,” said Mr Wilkinson.

Mr Wilkinson said he expected Hotel Viaduct Harbour guests would be able to use the bars and restaurants like any other members of the public, but clearly they would not be able to charge things to their rooms. “I doubt whether Westin will want to turn down revenue if a guest wants to order a meal although that is their business but in any event, there are many restaurants and cafes in the area and we will be offering some limited room service.”

Signage for the new hotel has already started and Hotel Viaduct Harbour has installed its own reception desk in the foyer, ready to begin trading fully on July 1 with a soft opening planned before this to iron out any operational issues.

“We expect to work harmoniously alongside Westin, and I am sure they understand our position.

“Ours will be a budget operation for sure, and our guests may have to carry their own bags, but I am sure there will be a market demand for what we are offering, and we will quickly start to generate income for all the people who invested in these rooms in good faith. I am guessing the travelling public will see it as a welcome move too. The rooms are certainly some of the best in Auckland if not New Zealand.”

Mr Wilkinson says there has already been enquiry for rooms over the Rugby World Cup and he expected good demand and higher rates would be achieved as the hotel gained more awareness.

ENDS

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