Sun Settles Dispute with Hilton, Pays Over USD 31 Million

Sun Travels & Tours has successfully resolved its longstanding financial dispute with Hilton International Manage (Maldives) Pvt Ltd. The settlement, totalling USD 31,252,874.46, was made directly to Hilton as mandated by a Singapore arbitration ruling linked to the termination of the Hotel Management agreement dating back to February 27th, 2009.

In addition to the settlement amount, Sun Travels & Tours disclosed an expenditure of USD 5.6 million towards legal fees and expert costs incurred during the arbitration proceedings.

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The conflict stemmed from the management agreement concerning Irufushi Resort, a 221-room, 5-star property situated on Medhafushi in Noonu atoll, which forms part of Sun Travels & Tours’ portfolio. The resort, inaugurated in August 2008, marked a significant milestone as the first tourist resort operating in Noonu atoll.

Hilton’s interest in managing Irufushi emerged towards the end of 2008, despite Sun’s successful operation of the property since its inception. Hilton proposed rebranding the resort under its flagship, suggesting minimal changes beyond the name alteration.

Sun Travels & Tours alleged that Hilton engaged in fraudulent misrepresentation during negotiations leading to the management agreement. Hilton purportedly presented inflated revenue projections for the resort, aiming to induce Sun into signing the contract. Sun pointed out discrepancies in occupancy and gross operating profit projections provided by Hilton, alleging multiple revisions within a short timeframe with no factual basis.

Further, Sun claimed Hilton failed to fulfil its maintenance obligations under the agreement, resulting in the property’s deteriorated condition. This, combined with alleged extravagant spending on procurement and recruitment, led to financial losses for Sun.

Due to Hilton’s alleged breaches and Sun’s escalating financial distress, Sun terminated the management agreement, citing irreparable harm caused by Hilton’s mismanagement. Sun asserted that Hilton’s subsequent portrayal of the termination in a negative light, including misconstruing the financial dynamics of the property’s development, was misleading.

While Sun has settled the arbitration award, it emphasised that the financial losses incurred due to Hilton’s actions persist. Sun reiterated its commitment to exploring all available legal avenues to mitigate these losses and safeguard its interests.

The resolution of this dispute marks a significant development in the hospitality sector, underlining the importance of transparency and accountability in management agreements within the Maldives’ tourism industry.