The Hilton group has pulled out of a proposed new five-star vacation club at Ariel Sands, The Royal Gazette can reveal.

Negotiations between the world-renowned chain and developer Bruce Sonneborn, one of the resort's new non-Bermudian shareholders, broke down some time ago, according to the chairman of Ariel Sands' board of directors.

Nicholas Dill told this newspaper that the exclusive hotel and cottage colony, including the Aqua restaurant, would close completely on January 1 to be demolished and rebuilt as time share accommodation plus a ten-room hotel. Mr. Dill said it may not reopen for three years. "At one point Hilton were involved and they have gone out of the picture," he said. "We are talking to other interested parties."

Mr. Dill said he did not know the details of the situation but was aware that Mr. Sonneborn and Hilton had a disagreement. "They agreed to differ," he said. "I wasn't a party to it in any shape or form."

Premier and Tourism Minister Ewart Brown appeared at a press conference to announce the Hilton deal alongside Mr. Sonneborn in March 2006.

He said last night: "I have been reliably informed that the Hilton deal has been off the table for months. I have met with the owners in recent weeks and they have confirmed that the project is very much on track and they are in discussions with a five-star brand.

"My understanding is that Ariel Sands will close next month and that demolition will follow soon thereafter."

Kim Swan, the United Bermuda Party's tourism spokesman, said the news that Hilton had pulled out was extremely disappointing.

He claimed that the press conference last March was premature as the deal had not been "signed off".

"That's what we have to guard against," he said. "It's almost like taking the photo opportunity when you have the fish on the line. The only way you can capture the prize is to land the fish in the boat. Many times we have seen convenient photo opportunities to portray tourism... in a positive light. Sometimes we can jump the gun."

Ariel Sands has been owned and operated by the Dill family, whose members include double Oscar winning actor Michael Douglas, for more than 50 years.

Mr. Dill said Ariel Sands Ltd. would still own the property in the New Year but 80 percent of the shares would be sold to non-Bermudians, including Florida-based Mr. Sonneborn and Samuel Eyde, a property developer from Michigan.

Asked if he was sad to see the majority of shares being sold outside the family, Mr. Dill said: "Very much so. The place has been there in the family since 1953. But it was not financially viable with 40 rooms. It wasn't making any money at all. We were losing money."

The plan for a Hilton Grand Vacation Club on the South Road, Devonshire, site was revealed in spring 2006. Hollywood star Mr. Douglas was said to have played a part in securing a partnership with the famous hotel chain and a $170 million development featuring vacation villas, a spa, a restaurant and a conference centre was given planning approval in March this year.

The original plan was to carry out the rebuild in stages to allow the resort to stay open at all times but Mr. Dill said it had been decided to shut down altogether in the hope of getting the work done faster.

"At the moment we estimate (that it will take) about three years," he said. "The footprint of the buildings will be not any greater but there will be two and three storey buildings. There is going to be ten hotel rooms on the property and the rest will be fractional interest."

Aqua restaurant is fully booked for New Year's Eve, which will be Ariel Sands' last day of business.

Mr. Sonneborn could not be contacted for comment last night.