Miami Hotel Is Closed – Refuses To Return $2.3 Million From A School Trip

Hotel chains have afforded flexibility in cancelling even prepaid bookings for individual guests. However they’re generally excluding group bookings. Individuals and companies with events are usually being told they’re still on the hook – and at best can reschedule their event.

This is true even when the hotel is closed over the dates of the event, even where they aren’t providing service like meals that are contracted for if they’re open, and even where it is against government orders in the local jurisdiction (such as where a hotel is located in a city with a ‘shelter in place’ order).

I’ve dealt with several hotel contracts under these circumstances. For instance, one Las Vegas hotel that will be closed said they wouldn’t refund deposits and even insisted on receiving subsequent payments. They said though the hotel was closed, the contract said deposits were non-refundable, and since the event could be rescheduled all remaining deposits were still due.

My response,

  • Force majeure is clear that we pay only for services actually rendered by the property prior to termination.
  • Since the hotel is not performing its obligations under the contract, it cannot keep funds meant to pay for those services.
  • While force majeure excuses Caesars Entertainment from damages related to its non-performance, it does not excuse damages for failing to refund money provided up front in exchange for those services.
  • A force majeure clause effectively makes the contract void, as though it had not happened, restoring both parties to the positions they held prior to its execution.

I insisted on immediate refund of deposits, and they agreed.

A New York City private school though hasn’t been so lucky and is now locked in a battle with Miami Beach’s Eden Roc hotel over a $2.3 million deposit for an April trip.

  • They rented 621 rooms for 10 nights

  • There wasn’t just a force majeure clause in the contract – it specifically cited disease outbreak.

  • The school is out of session. New York is under lockdown.

  • The hotel itself is closed to guests.


Credit: Eden Roc

The hotel can’t perform its obligations under the contract even if the school showed up. Nonetheless, according to the suit, the hotel demanded that the event go on “with whomever was foolhardy enough to travel from New York to Miami Beach” or be rescheduled (but was unwilling to push it out to the same time next year). Instead of a refund, they demanded an additional $1.2 million to cover their expected revenue under the agreement.

By the way, this school has booked two annual trips twice in the past with the luxury property. This was the first year of a three year contract which it will now seek to break. I’m not sure the hotel’s position is even to its own advantage, though of course like so many it’s not thinking about what’s right or in their long-term interest, they’re looking to survive to worry about the long-term when it comes.

The property is quite familiar with lawsuits, ending its 50 year deal with Marriott that began in 2005 after only 8 years (Marriott prevailed but the hotel is now a Nobu), and getting into fisticuffs with the Fountainbleau next door.

However the Eden Roc experience seems to be more the norm than the exception. Hotels have money and they do not want to give any back, at least when it comes to group business.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

More articles by Gary Leff »

Pingbacks

Comments

  1. Huh. I’ve never stayed there, but I vaguely recall hearing good things about this hotel.

    Cross this off the list of Miami Beach hotels I’ll ever give money to

  2. It sounds more like a negotiation than a final position. In a negotiation, you start out with a really hard line position, so that you have chips to give up to come to a more equitable settlement.

  3. Gary: My hotel in Mexico recently shut down (because of a lack of business; they remained opened well after others closed) and the OTA is keeping the non-refundable deposit as an administration fee. They cite “expenses mainly the marketing cost which we pay to trivago or tripadvisor or other companies cannot be refunded. Refunding the admin charges for all the customer when travel agencies are not going to get any new business for next few months it will be equal to closing down the business.”

    Putting aside the fact that we shouldn’t or can’t travel due to shelter in place ordinances, even if we did, wouldn’t the closure be a failure to delivery promised goods and services paid for and thus a valid claim with my credit card? So they are basically saying that if a hotel is not available (and I’m sure we can think of many different reasons why this could and has happened in the past), they can claim they will charge you not for the ability to take/hold/cancel the reservation but for Mkt. cost associated with operating???

    Curious as to what OTAs can legally get away with as far as keeping charges like these when there isn’t any product delivered. Thanks.

  4. Either this is A) a made-up case, B) not just a simple fun school trip to the beach, or C) possibly the worst case I’ve seen of overprivileged children being taught to ignore. the rest of the world. Several million dollars to brings kids to Miami Beach? I hope they’ve seen what happens to many Americans when they miss a single paycheck and reconsider this use of funds. That would be a great school lesson right there. God save us from the ultra- rich.

  5. Gary, I don’t mean to defend the hotel and I can do nothing but speculate … but I am going to throw out for discussion that it is entirely possible that they simply don’t have the money. You can have the best of intentions and $0 in your checking account. And in that case … what can you do?

  6. OK – is it just me or is the first question that comes to mind is what kind of “school” reserves 621 rooms for 10 days at a luxury hotel in South Beach?? Can I please go back in time and go to this “school”??? Dang!!

  7. Not a lawyer, but I’d guess any competent attorney would be quite happy to send a letter outlining the legal realities to hotel management and demanding they comply. Not only will the hotel very likely lose if they pursue this path, they’ll garner really bad public relations. Quite foolish.

  8. While I don’t expect most individual travelers to be successful in fighting hotels or airlines refusal to refund money (even if they dispute on a credit card) since the amounts are typically relatively small and you would never get an attorney to take the case (except maybe as part of a larger class action), this is totally different.

    NYC has over $2 million owed to them, has a lot of attorneys on staff available to help and has what appears to be (from the info in this article) a very strong case. Also, as you noted, the hotel is being very stupid since they are risking multi-year revenue streams.

    The Eden Roc will end up being owned by NYC if they don’t settle this quickly!

  9. @AC – this is a private school. NYC is not involved at all.

    These types of trips are not uncommon in the NYC metro area prep school world, but this one certainly seems to be on the extreme end of the scale.

    If the school wins the lawsuit and the hotel cannot pay, the school will have other options available to it. As AC notes, perhaps the Eden Roc will soon be partially owned by a Jewish prep school in NYC!

  10. @ Gary — Pleas keep a running list of all the crooked travel companies that we should boycott. Maybe you can add a section to your blog.

  11. A few thoughts;

    -What in the name of god school is able to spend millions to bring its students to Miami Beach for ten days? And why? Rome, London, Peru, cultural locations abound. Miami, while fun, is certainly not on that list and I would love to know the name of the school.

    -The money given to the hotel was most likely long used before for operating expenses. This is probably not a question of whether they will refund them…..more like, they don’t even have the cash to refund them – and everyone else. If they were running close to the bone, as many hospitality businesses do, good luck squeezing blood from a stone.

  12. It’s not just kids going on Spring Break. It was kids, parents and their rabbis going on Spring Break.

    From the Miami Herald:
    “Students, parents and staff of New York City’s Magen David Yeshivah day school had planned a grand Passover holiday at the iconic Eden Roc hotel in Miami Beach.

    They’d rented 621 rooms for 10 nights for about 1,200 guests to enjoy the beach, pool and restaurants in between a series of religious gatherings at the hotel’s banquet halls. The down payment for the April trip: $2.3 million.”

  13. To all those chastising the school and/or students, read the original story. This is a Yeshiva (Jewish orthodox school), and the trip is for 1200 people, students AND FAMILIES, for the entire period of Passover. It is very common for orthodox Jewish families to take their yearly vacations during Passover, as preparing one’s home for Passover is extremely labor-intensive. Due to the specific preparations needed (like special food and banquet halls), hotel takeovers where an organization (like a school) negotiates a group rate, are the most popular way this happens.

    This is not some obscene school excursion. It’s a group vacation for orthodox Jewish families.

  14. @Jim – you certainly don’t ask for more money. Businesses seem to be operating like they are above the law these days.

  15. @ Miriam — “This is not some obscene school excursion. It’s a group vacation for orthodox Jewish families.” — I guess the reality is that the families are ultimately out the money for a vacation (disposable income). The school simply served as organizer. When you divide it among the families, it’s a drop in the bucket compared to the obscene $20,000 to $40,000 a year tuition to send their children to private school. The hotel is still 100% in the wrong, and they should be ashamed of themselves.

  16. The problem with suing this hotel or any service provider – there are going to be a lot of bankruptcies, both Chapter 7 and Chapter 11. Prepare to wait in line with all of the other unsecured creditors for pennies on the dollar.

  17. And the total price of $3.5 million dollars for 621 rooms, which I think includes rooms, food and amenities at the hotel, comes to about $5,600 a family, which for those in the know about Passover programs is pretty reasonable, so to those saying wow how do i get my kids into that school, educate yourself about these holiday programs before speaking sarcastically.

  18. Thanks for the story. Any small chance that I would stay at Eden Roc hotel has just been eliminated.

    We have a similar issue with a local event venue (Country Club) and will probably end up in small claims court.

    All of these vendors are penny wise pound foolish as the future business they are losing by acting in bad faith will be many times higher than the short term gain from retention of deposits.

  19. Nationwide, over 100,000 businesses are being shut down to fight the coronavirus. Many will never open again. Around 10MM have as registered for unemployment insurance. Self-employed workers, like Uber drivers, do not get unemployment insurance. There is no end in sight. In my opinion, it will get worse before getting better. Someone will be left holding the bag. That is what happens when you shut down otherwise viable businesses. In this case, the hotel investors, the people that work at the hotel, and people with prepaid reservations or deposits (from New York in this case) are feeling the pain.

    I have some words from you from the New York State Governor, Andrew Cuomo (3/18/2020). “Be responsible, be civic-minded, be kind, be considerate, think of one another. Yes, we’re going to have an inconvenient period for a few months. We are. Deal with it. And deal with it gracefully. And deal with it with kindness and intelligence.”

  20. I do think the example is made up , even over Passover , which I think Eden roc stop doing. Since fountain blu expanded.
    I think it was right to call out the hotels names since I believe what they are doing is wrong and in human give covid 19. I think many people will not go there because of this.
    Force majore will solve this issues.
    I also think Managemet group does not have the cash on hand now to refund. Time for a capital call!
    How about 61 individual law suits costs to the hotel vs refund.
    I post a similar question to the group refund or keep. Almost 95% said refund.

Leave a Reply

Your email address will not be published. Required fields are marked *