The construction firm hired to build Bermuda's first new luxury hotel in 35 years has had its contract terminated a year before the projected completion date for the development.

Somers Construction Ltd (SCL) has been working as project manager for the $100 million Tucker's Point Hotel and Spa on the site of the former Castle Harbour Hotel for the last two years.

It was expected to remain on site at the five-star facility, where rooms will cost guests between $600 and $2,000 a night, until its completion in mid-2008.

But a source close to the project told The Royal Gazette that the agreement had ended prematurely. Peter Parker, executive vice president of administration at Tucker's Point Club (TPC), confirmed the partnership was over.

"We have now reached the critical milestone of completion of major structural components," he said. "SCL has executed this critical portion of the work with the degree of expertise and quality they were employed to provide. 

"As often exists on a project of this nature, there are a number of design-related issues outstanding on the project that are currently impacting the efficient execution of the work.

"For that reason it has been determined that TPC's direct management of the project would provide a more expedient path through to completion of the facility."

Andy Gordon, general manager of Somers, said: "We agree with the statement made by Tucker's Point." He would not comment further.

This newspaper understands that Tucker's Point Club invoked a clause in the contract allowing it to be terminated "at the owner's convenience" on July 16. Somers has worked on the Tuckers Town hotel since building began, overseeing the project and managing sub-contractors for a monthly fee. Those sub-contractors will now report directly to Tucker's Point Club.

Some labourers laid off by Somers after the contract ended are understood to have been taken on by Tucker's Point.

The five-storey Georgian-style hotel has been built around the existing steel structure of the cliff top Castle Harbour Hotel, which opened in 1931 and closed in 1999.

Financed in part by an $85 million loan from the Bank of Bermuda, the largest loan ever given by the bank, its high-end rooms are costing $1 million each to create.

They will feature luxury bathrooms and terraces with views of Castle Harbour and Harrington Sound and there will also be a 10,000 square foot spa, a 12,000 square foot yoga and tai chi lawn, a 5,000 square foot conference centre, two restaurants and two swimming pools.