Buy-to-let hotel company, and Blakes hotel owner, GuestInvest has been placed into administration.
The company, founded in 2003 by entrepreneur Johnny Sandelson, allowed private individuals to buy a luxury hotel room and stay there for free for up to 52 nights a year.
When not at the property, investors received a rental income from their bedrooms use, with promised returns of more than 8%.
Johnny Sandelson, chief executive of GuestInvest, confirmed the company had been placed into administration and told Caterersearch: "We're working very closely with Deloitte to work out a restructuring plan to find the best way forward with the business."
Nick Edwards and Nick Dargan from Deloitte have been appointed as administrators.
The company's first venture, Guesthouse West based in Westbourne Grove, which it bought in 2004, is not part of the GuestInvest group and continues to trade normally.
Blakes Hotel - whose patrons are said to include Kate Moss, Gwyneth Paltrow and Diana Ross - will continue to trade as a conventional hotel, as plans to sell rooms in the hotel to private investors for £1m had not been realised.
In 2006 Bank of Scotland Joint Ventures bought a stake in GuestInvest in exchange for a debt and equity package worth £200m.
GuestInvest bought two more London hotels, near Hyde Park and Notting Hill, for £100m earlier this year.
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By Gemma Sharkey
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