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Even as Banyan Tree, the Singapore-based hotel management company, has filed a petition against Al Areen, the owner of its luxury resort in Bahrain, for recovery of $1.12 million and termination of its operational contract with them, Al Areen has hit back saying it 'will not tolerate any breach of contract by Banyan Tree Hotels and Resorts to operate the desert resort property'.
Tariq Al Jowder, chief executive officer and owners' representative of Al Areen, says: "We spent more than $200 million on this resort and we will neither tolerate nor accept anything that could compromise its high quality and level of service."
As Banyan Tree states that it had filed a petition to wind up the Al Areen Desert Spa and Resorts Holding Company as Al Areen had an outstanding debt of $1,122,000, Mr Al Jowder retorts with allegations claiming the Bahrain resort had suffered as a result of the operator.
The year-on-year loss since the resort opened three years ago, alleged poor maintenance of the facility and inactive promotional activities are regarded as amongst the elements that lead to breaches of the agreement, he says.
"Numerous international renowned operators have approached us in the past and are still interested to take over management of the facility. We are committed to ensuring the highest international standards and will not hesitate to do so through any means we deem necessary," he adds.
"The Banyan Tree Hotels and Resorts did not deliver as agreed in our Hotel Management Agreement and we reserve the right to take the appropriate and necessary action required accordingly," Mr Al Jowder says.
The row is the latest in a number of disputed ventures in the Gulf for Banyan Tree. Last month, Banyan Tree was at odds with the Dubai property developer Meydan over an agreement to manage a luxury hotel and resort at the new Dh10 billion Meydan Racecourse in Dubai.
The luxury hotels group announced in October 2007 that it had won a contract to operate The Meydan and Banyan Tree Meydan, neither of which is currently operational.
But, in a statement published recently, Banyan Tree says that it had initiated arbitration proceedings against Meydan.
Dubai's Jumeirah Group is instead assisting in launching operations at The Meydan, which is due to open in March prior to the Dubai World Cup. Based within the $2.7 billion racecourse complex, The Meydan has 230 rooms.
The Banyan Tree Meydan, meanwhile, is a proposed 77-villa resort based elsewhere in the Meydan development.
The chairman of the Meydan City project, Saeed Humaid Al Tayer says that some plans for the multi-billion dollar development has been deferred.
Meydan has said it is inviting companies to bid for its management contract.
Banyan Tree's Angsana Dubai hotel closed last year. The building was sold by Damas, whose former chief executive admitted engaging in deals that were not approved by shareholders.
Banyan Tree said last September it agreed to "amicably terminate the management contract" with Damas.
On its part, Banyan Tree says its problems in the Gulf were linked to the global financial downturn. "It is common knowledge that the financial crisis has impacted several entities in the Middle East; to a certain degree, it has affected some of our hotels," says a spokeswoman for Banyan Tree.
"We endeavour to operate with the highest standards and if we are unable to settle issues amicably, we need to defend our own credibility and as a matter of principle, take a firm position with regards to any breaches and outstanding debts."
Indicating its plans for the region, it has signed agreements to manage the Banyan Tree Marine Reserves and Spa Al Gurm and the Angsana Abu Dhabi resort.
"While we remain committed to the GCC region and will continue to explore opportunities, it is very important that we find like-minded partners who sincerely share our vision and demonstrate a commitment to the Banyan Tree brand experience," the company says.
"Our plans to open in other parts of the Middle East continue to be on track. In January this year, we soft-opened Banyan Tree Al Wadi, a 101-key desert, beach and golf resort in the Ras Al Khaimah emirate. There are also five other projects under development in Abu Dhabi, Egypt and Oman."
Ever since the recession hit, hotel owners and managers the world over are at odds over how much to spend on keeping up deluxe properties, where bottom lines are sufferings as travellers scale back.
Owners and operators are fighting more often and more intensely as the economic downturn reduces the number of guests and forces down rates while owners struggle to cope with debt payments on their multi-million-dollar properties, say industry analysts.
In the current spat, dispute resolution should be given topmost priority as any protracted arbitration can seriously hurt Bahrain's travel and tourism sector.
The ultimate goal of any dispute resolution process should be to provide to each of the parties the rights and remedies that they bargained for in the hotel management agreement.
Since most hotel management agreements are very long-term agreements, the importance of the dispute resolution process cannot be over emphasised.
