SAN JOSE — The owner of the bankrupt Fairmont hotel in downtown San Jose has picked a high-profile lodging chain as its new operator, a potentially hopeful event for the shuttered hotel — although some obstacles loom.
The downtown San Jose hotel filed for bankruptcy in March and closed its doors and said from the outset that it was crucial for the hotel to replace its existing hotel management with an operator that could help extricate it from bankruptcy through cash support.
Hilton Hotels & Resort appears to be the answer for the financially ailing hotel, according to documents on file with the U.S. Bankruptcy Court.
The owner of the bankrupt Fairmont launched an effort to obtain bids to operate the hotel and said four companies put in bids to operate the hotel, which is an iconic property in San Jose.
“The Hilton bid contemplates that the hotel will assume the name ‘Signia by Hilton San Jose’ or another name that includes ‘Signia’ in it and that it will be managed by Hilton upon its reopening,” bankruptcy court records show.
A reopening date isn’t known yet for the financially troubled hotel.
“Upon reopening, the hotel would feature, among other things, 805 guest rooms, approximately 51,210 square feet of meeting space, a spa and fitness facility, an outdoor pool facility, and a ‘Club Signia’ lounge,” the bankruptcy documents show.
On May 24, the owner of the bankrupt hotel filed an amended disclosure statement regarding its business operations, assets, and liabilities. The hotel is seeking court approval of its plan to reorganize its shattered finances and emerge from bankruptcy. The disclosure statement is the linchpin of the reorganization efforts.
The hotel’s owners have, in multiple court filings, stated that they expect a new operator to provide $45 million to help bolster the hotel’s finances.
The Hilton bid includes financial support that the debtors believe is commensurate with the needs of the hotel and the debtors’ needs to exit Chapter 11,” the hotel owners stated in the court papers.”
The financial terms of the Hilton offer weren’t disclosed. The hotel owner also cautioned that a formal deal has yet to be struck with Hilton.
The owner of the Fairmont must gain court approval to terminate the existing hotel management and operating contract with Accor Management U.S., which formerly was Fairmont Hotel & Resorts.
It also has become clear that the bankrupt hotel owner, Eagle Canyon; and the hotel operator, Accor Management, became adversaries over a one-year period starting in March 2020, which is around the time that the coronavirus jolted the finances of the Fairmont and hotels worldwide.
Accor Management accused hotel owner Eagle Canyon Capital of not providing enough financial support to the hotel operators until revenue and occupancy levels could return to the pre-COVID levels.
“This stance led to a number of disputes,” Paul Tormey, an Accor regional vice president, declared in a statement to the bankruptcy court.
The owner of the Fairmont claims that Accor Management did not sufficiently help the hotel owner to address the crumbling finances of the Fairmont San Jose.
“The business relationship between Accor Management and the hotel ownership is beyond repair,” the hotel owners stated in the court papers.
Fairmont is a well-known name locally, but Hilton is known worldwide, especially among business travelers, which is a vital component of the hotel business in Silicon Valley, according to Alan Reay, president of Irvine-based Atlas Hospitality Group, which tracks the California lodging market.“The Hilton brand will definitely be a plus,” Reay said.
One potential wrinkle: A full-service Hilton hotel is already operating in downtown San Jose.
“It will be interesting to see how the people who operate the 355-room Hilton Hotel a few blocks away react to another Hilton downtown,” Reay said.
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May 26, 2021 at 07:55PM
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Bankrupt downtown San Jose hotel picks Hilton brand as manager - East Bay Times
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