News for the Hospitality Executive
|By Jonathan Shikes, The Press-Enterprise, Riverside, Calif.
Knight Ridder/Tribune Business News
Feb. 11, 2004 -- KSL Recreation Corp., the La Quinta-based owner and operator of some landmark California hotels, has announced that it wants to sell six of its properties.
But a longstanding labor dispute now centered at KSL's most recent acquisition, the Hotel del Coronado in San Diego, could complicate those plans.
The La Quinta Resort and Club and PGA West; the Claremont Resort and Spa near Berkeley; the Arizona Biltmore; the Doral Golf Resort in Miami; the Lake Lanier Islands Resort near Atlanta; and Hawaii's Grand Wailea Resort are all on the market.
KSL would like to keep the management rights to the hotels, while unloading the ownership to a single buyer, said spokeswoman Patricia Peeples.
Created in 1993 by investment giant Kohlberg Kravis Roberts & Co., which forms partnerships that fund hotel acquisitions among other things, KSL will use the money to buy more hotels or other real-estate investments, Peeples said.
"Simply put, KSL feels this is an appropriate time to unlock some of the value that has been created in our longer held resorts," she said by phone.
Last November, Kohlberg announced that it had formed a new partnership, which planned to spend up to $300 million in hotels or resorts. In December, it invested some of that money in the famed Hotel del Coronado in San Diego.
That hotel, and the La Costa Resort and Spa in Carlsbad, which KSL bought in 2001, will form the basis of KSL's future growth, Peeples said.
But KSL got into trouble immediately with the Hotel Employees and Restaurant Employees union when the Hotel del Coronado's 900 employees were all asked to quit their jobs and reapply for the same positions.
The situation exacerbated an already tense relationship between KSL and the union, whose employees have been working without a contract at the Claremont since 2001.
The two sides have also sparred over KSL's practice of making employees reapply for their jobs, which it did at the Grand Wailea and the La Costa.
On Monday, more than 150 union members from San Diego kicked off a nationwide boycott of KSL's properties by protesting outside the La Quinta Resort.
"When you spend money at the La Quinta Resort, you are putting money in KSL's pockets," said Hotel Employees and Restaurant Employees national organizer Kevin O'Connor by phone. "We foresee ongoing problems everywhere until we get this resolved."
Peeples said KSL's practice is typical in the hotel industry and added that "the labor issues are absolutely unrelated to the sale process."
But a San Francisco-based hotel analyst said the labor unrest is something that a potential buyer would have to look at when considering a hotel.
"They will ask how it will affect operating expenses because of the union elements or whether the dispute will affect sales at the property," said Thomas Callahan of PKF Consulting by phone.
Callahan also said KSL's goal of selling the hotels but retaining the management contracts will winnow the pool of buyers down to a smaller number.
But the hotel industry, which has taken a beating since Sept. 11 and suffered through a recession and the war with Iraq, has been on its way back.
"Everybody believes we are poised for positive growth in the next three to five years and people are looking to buy while the curve is on an upward cycle," he said.
ON THE BLOCK:
(c) 2004, The Press-Enterprise, Riverside, Calif. Distributed by Knight Ridder/Tribune Business News.