Interstate To Manage New Orleans Grande After Le Méridien Departure

NEW ORLEANS— Last month the Le Méridien flag was taken down from the hotel at 614 Canal St. here and it is now known as the New Orleans Grande Hotel and managed by Interstate Hotels and Resorts for LaSalle Hotel Properties, the owner of the hotel. The transition comes after nearly a year of legal proceedings in which LaSalle struggled to oust Le Méridien from the 494-room property. A similar struggle continues over LaSalle’s 407-room Le Méridien-operated property in Dallas. Le Méridien had operated the New Orleans hotel since 1984, and has operated the Dallas property for more than two decades. LaSalle bought the New Orleans hotel in 1996 and the Dallas property in 1997, and leased the hotels to Le Méridien in April 1998. The lease on the New Orleans property was not due to expire until 2008, according to statement from Le Méridien. However, Le Méridien’s sale by its former parent company, Granada, to Nomura International in 2001 triggered a right in the lease for LaSalle to buy out Le Méridien’s interest. “We had a 30-day right to do that,” explained Michael Barnello, COO of LaSalle. “We said [to the new owners]: ‘Look, we want to get to know you guys, and so we wanted to extend the 30-day right in order to give us time to evaluate the new Le Méridien,’” he said. But getting to know them did not appease LaSalle’s worries. Le Méridien’s new executives had a history of franchising, said Barnello. “And while franchise might be good for the company, it’s not good for owners.” Moreover, Le Méridien was looking for what LaSalle considered to be excessive investments in the properties, Barnello said. “They were rolling out their ‘Art and Tech’ program, and they were looking for owners to spend $30,000 to $60,000 per room.” By comparison, said Barnello, LaSalle spent only $42,000 per room when originally purchasing the Dallas property. “So we acted on our right [to buy Le Méridien’s interest], in December of 2002 and January of 2003,” said Barnello. “But Le Méridien refused to cooperate.” According to Le Méridien, however, LaSalle “refused to pay Le Méridien fair market value for what has been a highly profitable business.” But, said Barnello, “they never told us what the price should be. They just went straight to arbitration.” What followed in both New Orleans and Dallas was a series of legal contests, which eventually ended for the New Orleans property with a decision in November from the Louisiana Court of Appeal. “If LaSalle chooses to close, Le Méridien must begin vacating the premises and must assist in the orderly transition to the new tenant. Should LaSalle choose to go forward with a closing, such closing shall take place 30 days from the date of this opinion,” the decision read in part. Despite the immediate effects of the decision, the actual amount that LaSalle will have to pay is not yet known, as of the date of the transition. “Because the timing was what it was, and because the arbitration [to determine the fair market value]only ended on Nov. 27, we are still waiting on the panel to determine what the fair market value is,” Barnello said. Le Méridien “fully intend[ed]to conduct an orderly and seamless transition to the new operator of the property, continuing to hold the interests our employees, our customers and the city of New Orleans in very high regard,” the company said in a statement. But, according to LaSalle, Méridien refused to cooperate with the transition, and did not give LaSalle access to meet with current employees of the hotel to offer continued employment under the new management company. Since they were unable to meet with employees, said Barnello, LaSalle ran an open letter to employees in the New Orleans Times-Picayune. “The employees actually sent us a letter back, a hand-written letter with their names and signatures on it, and told us how much they appreciated it, and that they wanted to talk to the new operator,” said Barnello. On the day of the transition, Le Méridien “eff