Kempinski agreement with Grand Hotel Heiligendamm ends

6 Feb 2009 by Mark Caswell

Fans of five-star brand Kempinski may be interested to know that the group's management contract with the Grand Hotel Heiligendamm has come to an abrupt end, with both Kempinski and the hotel itself blaming each other for the breakdown in the partnership.

Located on the Baltic Sea coast in northern Germany, the seaside spa resort dates back to 1793. More recently the hotel hosted the G8 summitt in 2007, and Kempinski has held the management contract for the property for over a decade. Business Traveller visited the hotel in 2004 (click here to read Alex McWhirter's feature), but disagreements between Kempinski and the hotel's owners have led to the two parting company.

Kempinski has released a statement saying that it has terminated the management contract “with immediate effect”, claiming “breaches of contract and the non-payment of management fees for the past two years”. The statement said that “continued interference in day-to-day hotel operations by the owner hampered its ability to exercise effectively its internationally-recognised expertise in luxury hotel management and to run the property on a proper commercial basis”.

The Grand Hotel Heiligendamm has also released a statement, in which it says that “differences in opinion between Kempinski and the hotel owners have existed for a long time over the unsatisfactory hotel results”. It continues that following a meeting on December 2, 2008 “the Kempinski management team was tasked to improve the hotel performance or face termination of the alliance”.

The hotel’s statement also says that “in the view of the owning company, Kempinski does not have any grounds to give notice and as such the management fees due are now in dispute. In addition, the owners have claims against Kempinski amounting to millions of Euros in total.”

For its part Kempinski claims that “major investments such as the development of the sea-front villas and a thalasso- and ayurveda centre were not made, which inhibited the performance of the hotel”.

The Grand Hotel Heiligendamm says that the marketing and sales of the hotel will now be undertaken by marketing groups the Leading Hotels of the World and "The Selection of German Luxury Hotels".

Kempinski has debranded 19 properties from its portfolio in the past 24 months, including its two London hotels The Bentley and The Courthouse Kempinski (see online news March 12, 2008).

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Report by Mark Caswell

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