Djarum to invest in hotels

Ferdinand Nainggolan, a deputy at the Office of State Minister of State Enterprises, said that the government was considering a proposal from PT Djarum, Indonesia's second largest cigarette producer, to jointly manage two ailing state-owned hotels: Hotel Indonesia and Hotel Wisata.

He said that Djarum had submitted a proposal to inject around Rp 1.7 trillion (US$202 million) with a request in return of managing the hotels for 30 years.

In the proposal Djarum also asked a permission to build a new shopping mall that would connect the two hotels, he said.

However, Ferdinand explained that currently the ministry was still seeking the best cooperation scheme with Djarum. The best options would either be in a revenue-sharing operation or privatization scheme.

The government owns 100 percent stake in the two hotels.

Ferdinand said that the five-star Hotel Indonesia last year booked a loss of Rp 3 billion.

In order to revive the hotel's competitiveness, the government needed around $250 million to renovate its shabby appearances.

"Hotel Indonesia doesn't look like a five-star hotel. It has difficulty to compete with its nearby competitor such as Hotel Grand Hyatt and Hotel Nikko. To attract more guests we need to rejuvenate the entire hotel," he said. -- JP