Wardman Hotel Owner sues Marriott, eyes clawback of pre-petition funds

By Sarah Lizee

Olympia, Wash., July 26 – Wardman Hotel Owner, LLC has filed an adversary proceeding against Marriott Hotel Services, Inc., according to a Friday filing with the U.S. Bankruptcy Court for the District of Delaware.

The company said it is seeking to recover millions of dollars in material damages from Marriott, plus recovery of an avoidable transfer in the amount of $2 million, and the turnover of the estate’s interests in the remaining funds in the property’s furniture, fixtures and equipment reserve totaling about $4.7 million.

“Over the past decade of Marriott Hotel Services, Inc.’s stewardship, the net operating income of the hotel plummeted from $24.77 million in 2010 to $5.02 million in 2018, an 80% drop,” Wardman said in the filing.

The company said that although the property had long been positioned as a convention hotel, deriving substantial revenue from group business such as large conference and conventions, Marriott funneled premium group bookings to its other more recently opened Marriott-managed and owned properties in the Washington, D.C., area, while using the property as “a dumping ground for far less profitable budget-oriented groups.”

“At the same time, Marriott was unwilling or unable to replace these lost group revenues with traditional overnight, or ‘transient’ bookings, instead over-relying on online travel agencies such as Expedia or booking.com, which charge high commissions for each reservation, significantly reducing profitability,” Wardman said.

“Even with these depressed revenues, Marriott let costs at the property spiral out of control.”

The property’s expenses significantly exceeded those of its competitors, including inflated labor costs well in excess of those set forth in a collective bargaining agreement with Marriott’s union employees, the company said.

“By all measures, Marriott’s management of the property was an abject failure, as the property suffered from consistent and substantial declines in revenue, while enduring ever-increasing operational costs,” Wardman said.

The company also said that at the onset of the pandemic, Marriott “exacerbated its failures by attempting to take advantage of the pandemic to shore up its own corporate accounts – baselessly demanding that debtor fund tens of millions of dollars in working capital and initially refusing to suspend hotel operations at the property, all in disregard for both the health and safety of the employees and guests as well as the financial stability of the property.”

Washington, D.C.-based Wardman Hotel is the owner of a convention hotel, formerly operated as the Washington Marriott Wardman Park Hotel. The company filed Chapter 11 bankruptcy on Jan. 11, 2020 under case number 21-10023.

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