Bankrupt LuxUrban Is Taking Reservations At Shuttered Hotels, Court Filings Warn
You can book a room at The Tuscany by LuxUrban hotel on East 39th Street for Friday night for roughly $800, but good luck checking in.
The hotel is one of a handful purportedly operated by LuxUrban Hotels, which filed for Chapter 11 bankruptcy last week, but when a reporter visited Tuesday evening, a security guard said it wasn't accepting guests. Paying customers were left confused last week when they showed up and were turned away, The New York Times and CBS New York reported.
The stories alarmed attorneys for the Department of Justice and LuxUrban's online booking platform, who sent letters to a bankruptcy judge asking for an emergency hearing because of possible harm to consumers.
LuxUrban Hotels filed for bankruptcy last Sunday, saying it needed relief to continue running the four Manhattan hotels it operates. The company claimed less than $10M in assets in the filing but said it had secured debts of more than $15M and unsecured claims of more than $22M.
But Cloudbeds, the online hotel booking platform that LuxUrban uses, filed a letter with the U.S. Bankruptcy Court for the Southern District of New York late Monday night claiming it “has reason to believe that one or more of the Debtors’ hotels for which Cloudbeds provides booking engine services are now closed.”
LuxUrban hasn't updated information about the status of the hotels in the Cloudbeds system, according to the letter, nor has it responded to requests for clarification.
Cloudbeds' attorneys from DLA Piper wrote that the automatic stay in the Chapter 11 process means the bankrupt hotel chain is now requiring “the booking engine to show availability for one or more hotels that may not be operational.”
LuxUrban has four hotels listed on its website: The Herald, a 168-key hotel at 71 W. 35th St., the 125-key Tuscany at 120 E. 39th St., the 74-bed Hotel 27 at 21 E. 27th St., and the 79-room Hotel 46 at 129 W. 46th St.
An attorney for the U.S. Trustee, a branch of the DOJ tasked with preventing fraud and dishonesty in bankruptcy cases, filed a letter with the court Friday citing concerns over employee wages and consumer protections.
“It is our understanding that although the Debtors currently may be without cash, there are a host of other issues that may need to be brought before the Court,” U.S. Trustee trial attorney Andrea Schwartz wrote.
The Trustee wrote to the court the same day as the Hotel and Gaming Trades Council, AFL-CIO, submitted a letter alleging LuxUrban owes the unionized hotel workers and managers weeks of wages. Some employees at The Tuscany and Hotel 46 who belong to the union are owed at least five weeks’ pay, lawyers for the AFL-CIO allege.
The hotel operator has also illegally withheld at least $57K in 401(k) retirement contributions that it was required to pay under the collective bargaining agreement, lawyers for the union said in the letter.
All three letters cited LuxUrban's lack of first-day declarations, which are filed in seeking a hearing to demonstrate how the bankrupt entity plans to operate under Chapter 11 protection and eventually exit bankruptcy.
Bankruptcy Judge David Jones, who is overseeing LuxUrban's Chapter 11 case, scheduled a virtual conference next week to respond to the claims in the letter.
Leo Jacobs, lead restructuring counsel for LuxUrban, was out of the office for Rosh Hashanah and declined to comment.
The New York Fire Department had previously ordered LuxUrban to vacate The Tuscany hotel, according to a note from building ownership posted on the outside of the hotel reported by The New York Times last week. Some workers stopped showing up when LuxUrban abruptly stopped paying them, CBS reported.
The FDNY didn't respond to Bisnow’s questions about its plans to take action on LuxUrban's hotels. A spokesperson for the NYC Department of Buildings said it had received a safety complaint regarding The Tuscany on Sept. 9 but hadn't found any violations.
LuxUrban, which once operated more than a dozen properties across the U.S., has been evicted and sued by most of its landlords over failure to pay rent. As recently as last month, the landlord for The Herald said that LuxUrban skipping out on rent was a factor that had contributed to the properties’ financial distress.
CORRECTION, SEPT. 26, 4:20 P.M. ET: A previous version of this story misstated the amount that LuxUrban Hotels allegedly withheld in 401(k) payments to hotel workers. This story has been updated.
