Julian Gerner, new manager of the Prince Of Wales. Photographs by Teagan Glenane FCN
Julian Gerner outside the Prince of Wales in Fitzroy Street, St Kilda. Photo: Teagan Glenane

Cameron Houston

Prominent hoteliers Julian Gerner and Tom Walker earned an enviable reputation for their uncanny ability to transform dive joints into gastropubs that had Melbourne's A-list crowd snaking out the doors.

With the financial backing of prominent businessman and racehorse owner Gerry Ryan, the pair acquired the Albert Park, Middle Park and Newmarket hotels, before spending about $5 million on St Kilda's Prince of Wales Hotel in 2011.

But their company, Melbourne Pub Group, which also includes prominent chef Paul Wilson as a director, has lost some of its lustre over the past year, culminating in the shock departure of Mr Gerner last week.

In the past month, Mr Ryan is believed to have injected $1 million of working capital into the hotel business, while management has been instructed to slash labour costs.

The lavish Cellar Bar below the Newmarket Hotel, which cost about $1.5 million to refurbish, has been temporarily shut down just four months after opening.

Company sources have also claimed there was growing disquiet among directors regarding Mr Gerner's ''rock'n'roll lifestyle'', which reached flashpoint over Christmas.

Mr Gerner insists his departure as the group's operations and marketing manager was his decision.

''I would like to say that it was an amicable negotiation between partners, which was completely agreed upon by all parties and proposed by me,'' Mr Gerner said.

He said he lacked the drive to continue running the pub empire in the face of increasingly difficult trading conditions. ''I've been the frontman, I've been the promoter, I've been the marketer and the driver of all the businesses to date, but these days you have to micromanage hospitality and the margins are very slim,'' he said.

''I don't have the energy to work 100 hours a week under the scrutiny and pressure of others.''

According to an insider, the group is believed to have amassed debts of more than $10 million, while trade at several venues within the Prince of Wales complex has slumped since the acquisition from John van Haandel.

''I don't think it's any secret that the group has spent a lot of money on a lot of things over a lot of time - but I don't want to talk numbers,'' Mr Gerner said.

Mr Gerner confirmed the ambitious Cellar Bar project - an upmarket Latin dining space and burlesque lounge - had failed to fire.

''The first model didn't work, there's no secret about that. We tried to do something different and the market didn't want it. I don't think there's any animosity around that part of the business. I've had about 13 hits and one miss,'' Mr Gerner said.

He remains an equity partner in the Melbourne Pub Group, but wants to pursue other hospitality interests and has developed a new boxing format based on Twenty20 cricket.

Mr Gerner also co-owns Richmond's Royal Saxon.

Mr Walker denied that there was any acrimony surrounding Mr Gerner's sudden decision to resign from the day-to-day operations of the business.

He confirmed the company had recently received more funding from Mr Ryan, but denied it was $1 million.

Mr Walker, who has been in partnership with Mr Gerner for seven years, said turnover at the Prince of Wales had increased in the past year.

The business was in a ''consolidation phase'' following a period of rapid growth, he said. ''All businesses are going through transformation phases at the moment - welcome to business in 2013.''