Capella Pedregal Dispute: What's Behind the Headlines

El Arco in Cabo San Lucas
El Arco Cabo San Lucas Los Cabos // Photo by sorincolac/iStock/Getty Images Plus/Getty Images

capella pedregalOver the past week a major luxury resort in Los Cabos has been at the center of a management dispute between the property's co-owner, CarVal Investors, and management company Capella Hotel Group (CHG). Luxury Travel Advisor breaks down both sides of the story bring you the latest on what's been happening. 

Timeline of Events

The dispute began with a statement November 4 by CarVal that the resort, Capella Pedregal, had severed management ties with CHG, and would be known as The Resort at Pedregal. At the time CarVal had said that the management change would not have an impact on the property, which was slated for an early 2015 reopening after sustaining damage during Hurricane Odile. Leadership reportedly passed to interim GM Bob Holland. 

CHG quickly refuted the claim that it had been removed as the property's management company. CHG claimed that on Monday, November 3, CarVal representatives had arrived at the property and informed the CHG management team they were taking over the hotel. 

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That Friday, November 7, CHG announced that a New York Supreme Court Judge had ordered CHG be reinstated as the property's management company. However, at 2:00 pm Central Time that day, CHG reported that company representative GM John Volponi was refused entry to the property, along with an official from the Mexico Notary of Public. 

Dueling Allegations

What's behind the dispute? Statements by both companies show a disagreement  over the performance of the luxury property, as well as accusations regarding the withholding of relief funds intended to help property employees who had been affected by Hurricane Odile. 

According to a November 7 statement by CarVal, the decision to terminate the property's relationship with CHG came about as a result of improper financial reporting and diversion of revenues through improper fee calculations. 

“We have spent several months working with Capella Hotel Group to try and resolve the defaults,” said a spokesperson for Hoteles del Cabo in the statement. “Specifically, Hoteles del Cabo presented Capella Hotel Group with a letter of notice of default on August 14, 2014, that showed various violations, including unauthorized payments to themselves and false financial reports.”

The statement also noted that the property's ownership had been "disappointed by the Capella Hotel Group's inability to establish itself as a global brand." The statement cited several "losses" by CHG and its predecessor, West Paces Hotel Group, including being removed as management company for Daufuskie Island Resort and Breathe Spa in Hilton Head, South Caronlina; losing management during the bankruptcy of Carefree Resort and Villas in Arizona; being removed from the Capella Telluride in 2011 (now the Hotel Madeline); and being removed as manager of the Setai Fifth Avenue in New York in 2012. 

In response, CHG has pointed to evidence of its success in managing the Los Cabos property, including holding a AAA Five-Diamond Award rating for three consecutive years. Additionally, in 2014, CHG says that it was named the number one hotel in Mexico by Travel + Leisure's World's Best Awards 2014 survey, as well as being ranked number 15 in the world on Travel + Leisure's World's Best Awards 2014 list of Top Hotels Overall. Additionally, the property was listed on Conde Nast Traveler's 2014 Gold List and in TripAdvisor's Traveler's Choice Awards. 

“Under CHG’s management, Capella Pedregal has proven to be a strong presence in the building of a positive tourism image for Cabo San Lucas and in making a valuable contribution to the local economy,” said Horst Schulze, CHG chairman and CEO, in a November 4 statement.     

Hurricane Odile

Another point of contention between the two companies involves the disbursement of funds donated for the relief of hotel staff affected by Hurricane Odile

In a November 7 statement, CarVal accused CHG of withholding funds donated to help property team members recover from the effects of the hurricane. 

In another statement on November 7, CHG responded that the company has set up an Employee Relief Fund on GiveForward.com. In order to distribute the funds, the property was required to register with the Mexican government. The registration was received the week of November 7, CHG said, and funds were to be distributed that week. CHG said that it was CarVal's takeover of the property that hindered the disbursements of the funds. 

Luxury Travel Advisor has reached out to both parties to find out the exact status of the hotel's reopening, as well as the status of reservations at the property. A spokesperson for CHG declined to comment, citing pending litigation. 

Keep visiting www.luxurytraveladvisor.com for further updates to this developing story. 

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