Capella Hotel Group Removed from Cabo Resort for Improper Financial Reporting and Diverting Revenues
Hoteles del Cabo, S.de R.L.de C.V., owner of The Resort At Pedregal, announced last week the removal of Capella Hotel Group from the resort (formerly known as Capella Pedregal), a luxury hotel in Cabo San Lucas, Mexico. Capella’s termination resulted from improper financial reporting and diversion of revenues through improper fee calculations.
Hoteles del Cabo, S.de R.L.de C.V., owner of The Resort At Pedregal, announced last week the removal of Capella Hotel Group from the resort (formerly known as Capella Pedregal), a luxury hotel in Cabo San Lucas, Mexico. Capella’s termination resulted from improper financial reporting and diversion of revenues through improper fee calculations. Hoteles has instituted legal action to recover the misappropriated funds and will pursue its remedies for other defaults under the management agreement.
“We have spent several months working with Capella Hotel Group to try and resolve the defaults.” said a spokesperson for Hoteles del Cabo. “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 spokesperson added, “Capella responded to their termination by making a public spectacle of a private business matter, issuing a statement claiming to be an innocent bystander caught in an ownership dispute. In fact, they were terminated for their failure to honor the terms of their management agreement, failures we attempted to resolve in good faith.”
“Beyond its mismanagement of the property itself, Capella has held funds donated by generous patrons to help the neediest team members recover from the devastating effects of Hurricane Odile,” the spokesperson continued. “Capella is holding tens of thousands of dollars intended specifically to help hotel associates get their lives back in order following the horrific storms that have plagued Cabo recently. For reasons beyond our knowledge, they have opted not to distribute those funds. This is not only unacceptable for the unfortunate families involved, but should be doubly embarrassing in light of the fact that the funds were donated by our guests.”
Hoteles del Cabo already has distributed $125,000 directly to employees of the hotel.
The spokesperson noted that Hoteles has been disappointed by the Capella Hotel Group’s inability to establish itself as a global brand. With the loss of Capella Pedregal, the Capella Hotel Group is down to just four operating Capella-flagged hotels. In addition to failing to open many of its previously announced hotels, Capella and its predecessor, West Paces Hotel Group, lost several high-profile management contracts in recent years, including:
- In 2008 and 2009, West Paces Hotel Group was removed as the management company for the Daufuskie Island Resort and Breathe Spa in Hilton Head, S.C. West Paces and its founder, Horst Shultze, later were investigated by the South Carolina Department of Labor and sued by former employees over claims of non-payment to workers.
- West Paces Hotel Group lost management of the Carefree Resort and Villas in Ariz., during the resort’s bankruptcy filed in 2008.
- In 2011, Capella was removed from the Capella Telluride (now Hotel Madeline) in Telluride, Colo., and the Inn at Lost Creek in Mountain Village, following a foreclosure.
- In 2012, Capella was removed as the manager of the Setai Fifth Avenue in New York.
Hoteles del Cabo S.de R.L.de C.V is a subsidiary of a Mexico-based trust; the trust has owned The Resort at Pedregal since it was developed in 2006 and later opened in July, 2009.