DENVER – Marriott International impeded audit efforts at the Westin at Denver International Airport, and the city cannot fully monitor the performance of the hotel in order to protect the city’s asset, according to a new audit from Denver Auditor Timothy M. O’Brien, CPA.
Auditors waited months while Marriott delayed audit work and withheld necessary financial, operational, and performance information. The hotel company pointed to the hotel management agreement, which designates the information requested as “proprietary.” The audit found this withholding of key information could hinder the airport’s ability to conduct oversight activities to validate the hotel’s self-reported financial and operational information.
“This is a transparency and accountability issue,” Auditor O’Brien said. “If we could not get the documents needed for the audit in a timely manner, how could the airport be doing regular monitoring on its own to assure the proper care and management of the hotel?”
The City and County of Denver owns the Westin hotel, which opened in 2015. The city spent more than $700 million in bonds and airport capital funds to build the hotel and transit center. The city entered into a hotel management agreement with Marriott and pays Marriott a management fee to run the Westin hotel.
According to Denver Charter, the Auditor has the right to conduct audits of city contracts and franchises with access at all times to books, accounts, reports, and other records. The hotel management agreement provides audit rights to the owner and also requires the Westin to maintain the hotel at a level of service considered “first-class,” as measured by guest satisfaction studies, so as to protect and preserve the asset and to optimize the financial performance of the hotel’s operation.
However, when auditors requested data, operating procedure information, financial information and other supporting documents, they were met with significant pushback and delays. Because of the pushback, the audit was severely limited.
Throughout our audit, Marriott declined to provide auditors with information and documentation that it deemed proprietary, citing a provision in the hotel management agreement, which contradicts the owner’s audit rights section in the same agreement, as well as the Auditor’s authority under Denver Charter. Despite this authority, auditors were not allowed to have the requested information and at times were only allowed to review parts of requested documentation under supervision and only at a high level. The audit team also was not allowed to take detailed notes or make copies of the documentation, as required for audit records.
The city — through the airport — paid for two external reviews by a third party, one of which is still not completed. Marriott initially refused auditors’ request to review the results of the completed review because it claimed the review was proprietary. Even with the city, as the owner of the hotel, being a party to a non-disclosure agreement between Marriott and each external reviewer, Marriott resisted releasing the information. Eventually, after the end of audit fieldwork and after many requests from the audit team, Marriott released the results of the first third-party report. While we cannot discuss the information in the report due to the non-disclosure agreement, the team did have concerns about the quality of the report itself. Marriott still has not indicated if and when the city would be able to review the second third-party report.
“The delays and pushback in sharing the requested reports shows the airport isn’t doing its own reviews on a regular basis,” Auditor O’Brien said. “If the airport already had this information as it should, we would not have needed to wait for permission from Marriott.”
Marriott said it conducts annual reviews of all of its hotels and Westin management told the audit team the Denver airport hotel received one of the best scores in the company. However, the audit team could not verify this or any other self-reported performance information from the Westin due to the lack of access to supporting documents.
“Who is monitoring the hotel if there’s no supporting documentation for their claims?” Auditor O’Brien said. “Right now, the airport is taking the Westin’s word that this public investment is being properly managed.”
Because of the lack of access to documentation, the audit team could not complete testing on 96 of 132 items related to financial transactions. The team also could not review customer complaints and comments to see how the hotel responds to them. Bad reviews and unanswered customer concerns could result in reputational damage and lost revenue to the city.
The audit report recommends that the airport and Denver’s city attorney renegotiate the hotel management agreement to remove the proprietary restrictions. The Denver Charter calls for the Auditor to receive the accounts and records to perform audit work and the current agreement directly contradicts this authority.
“The Charter is the will of the people. It’s not an ordinance passed by City Council and it’s not an executive order from the Mayor,” Auditor O’Brien said. “The people of Denver decide what’s in our Charter and we must adhere to that highest standard.”
The audit team also found other concerns related to a separation of duties in managing a third-party contract, potentially wasted money due to duplicative efforts in this third party monitoring the airport’s activities, no formal process for monitoring financial performance since the hotel opened, and a lack of documentation of on-site inspections of the facilities.
When the audit team toured the hotel on two occasions, they identified a damaged chair and a chipped table in the hotel lobby and no toilet paper in the lobby restroom, as well as items on the bathroom floor. We recognize the photographs below and the auditors’ two tours of the hotel are snapshots of moments in time; however, without documentation of on-site inspections, the airport cannot ensure this damage and poor upkeep isn’t present all the time.
The audit found the airport cannot ensure potential hotel revenues are not being lost due to a lack of financial and performance monitoring. The airport agreed to all of our recommendations and claimed two had already been implemented. We will return for follow-up work to confirm these corrections.