More details on Embassy dispute
Documents filed Thursday in El Dorado Municipal court attempt to shed additional light on the dispute between the owners of Embassy Suites and its food and beverage concessionaire.
Koar-Tahoe Partners, L.P., the hotel’s owners, have filed eviction papers against TurZak, Inc., the company that operates Zackary’s Restaurant, Turtles Sports Bar, a wedding service and gift shop in the hotel.
The lease between the two parties allows for a cancellation if there are three failures in within a six month period to follow obligations in the agreement.
The documents filed Thursday allege TurZak failed to pay about $150,000 in rent, and that the concessionaire was both unwilling to comply with lease provisions and uncooperative with hotel management and policies.
Koar is seeking possession of the premises, legal costs and damages at the rate of $1,015.64 per day from July 1, 1997 until the property is recovered.
Steve Solberg, general manager of the state line-area hotel, characterized the conflict with TurZak as philisophical differences and a reluctance by TurZak to conform with Embassy’s evolving business strategy.
“It’s a different world today than it was in 1991, and over the years the hotel has changed dramatically in clientele and marketing,” he said. “While we have changed, (TurZak) has not.”
George Echan, TurZak’s attorney, agrees that Embassy Suites has a different opinion than his clients about how the concession business should be run.
However, he believes the contract both parties signed six years ago allows TurZak to continue operating in its present form.
“A lot of times parties have regrets about what they agreed to in the beginning, but that does not denigrate the sanctity of the contract we are trying to observe,” Echan said.
A dispute develops
The soured tenant-landlord relationship appears to stem from a disagreement over the limited meeting space in the hotel, which started more than a year ago.
Under the original lease agreement, TurZak was able to freely book the meeting rooms for wedding receptions – in conjunction with ceremonies in the chapel – six to nine months in advance.
But Embassy’s management, with Koar’s approval, changed the policy when it interfered with their ability to book large meeting groups who wanted to stay in the hotel.
“The meeting space is built in the building to facilitate selling the rooms,” Solberg said. “Unfortunately, people in the weddings being booked were oftentimes not staying in the hotel. We would find a convention group and couldn’t take them because we had no meeting space, but plenty of suites.”
After the policy change, the hotel has done much better financially, Solberg said. For example, September will be the hotel’s best month so far this year, because 6,000 suites are already booked in conjunction with meeting groups.
But Echan says the change prevented TurZak from running its once-lucrative wedding business, which is one of the reasons why the company filed a lawsuit against Koar and Embassy in April.
Since then, Koar officials say communication between Embassy and TurZak virtually ceased, and the relationship only became more strained as new issues unfolded.
One such issue is the quality of the food and beverage served in meeting rooms and during banquets, Solberg said.
He said everything within the hotel needs to change to accommodate the hotel’s focus on a new clientele that is generally older and more conservative.
“Our rates are much higher than they used to be, but you can’t just raise your rates and not raise levels of service and quality,” Solberg said. “When a major corporate person comes in, they’re paying a lot of money and expectations are high.”
He said the hotel has received complaints about food service in the meeting rooms, making it difficult to re-book those groups.
“When people leave the hotel and stay their stay was OK, we get concerned,” Solberg said. “Embassy’s philosophy is dazzle the guests and they will want to come back.”
Solberg said Zackary’s restaurant has not caused any problems and the management has been happy with its performance.
Turtles, however, has become a bone of contention.
The popular night club’s atmosphere of loud music and dancing does not mesh well with the type of guest Embassy is now seeking, Solberg said. Embassy has suggested to TurZak that Turtles be changed to a more low-key establishment, such as a piano or violin bar.
“That would be a nice option – something more quiet and upscale than what we currently have,” Solberg said.
TurZak’s attorney said Embassy has no right to force his clients to change the nature of their business, which is spelled-out in the contract.
“When TurZak came in, they were entitled to run a night club named Turtles. Now Embassy wants it to become a piano and string bar,” Echan said. “They could want it to become a space shuttle launch pad, but they still have to refer to the contract.”
Balloon payment looms large for hotel ownership
Complicating things further is a separate matter between Koar and city of South Lake Tahoe officials about a proposal to convert 188 of the hotel’s 400 suites to time-share units.
Koar officials say they need the conversion in order to prevent the hotel from going bankrupt as a result of $52 million outstanding loan payment that can’t be refinanced.
Echan alleges that the time-share conversion is part of the reason he believes Koar is trying to drive TurZak out of business.
“I find it massively coincidental that all the gripes against TurZak have occurred in context of (Koar’s) need to convert time-share,” he said.
Martin Flannes, a Koar-Tahoe attorney, said the company did approach TurZak management about the possible time-share conversion and asked if TurZak would lease certain portions of its space that is unused during the day.
“We received a very negative reaction and were told that they would do anything in their power to stop (a partial conversion),” Flannes said. “Our current (time share) plans do not require changes to their operations, so the disputes are really not related in any way. The problem with TurZak is not a solution to either the loan or the time-share conversion.”
A court hearing set for Sept. 23 will look at whether or not Koar’s procedure in administering the eviction notices was deficient. Another trial date to determine possession of the property will likely be set within 30 days after that, Flannes said.
Should an eviction take place, Embassy plans to initially manage the food and beverage operation itself, Solberg said. The company has already begun soliciting applications for food and beverage positions at the hotel, which are currently filled by TurZak employees.
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