Djarum will manage Hotel Indonesia, Inna Wisata

The Jakarta Post, Jakarta

After months of protracted negotiations with the government, the country's third largest cigarette maker PT Djarum has been named the new operator of state-owned Hotel Indonesia and adjacent Hotel Inna Wisata.

A press statement issued by Hotel Indonesia said that Djarum's property subsidiary PT Cipta Karya Bumi Indah (CKBI) will manage the two hotels, both located in the prime area of Central Jakarta, under a 30-year build, operate, and transfer scheme with the government.

The statement said that Djarum planned to invest around Rp 1.3 trillion (US$146.11 million), some Rp 230 billion of which is to be used to finance the renovation of the legendary five-star Hotel Indonesia, and more than Rp 1 trillion to a develop shopping mall, connecting the two hotels.

Under the deal, Djarum will get 51 percent of the profit from the two hotels, while the remainder to go to PT Hotel Indonesia Natour, a state-owned company that owns the two hotels.

Djarum had previously insisted on an 80:20 percent profit sharing mechanism.

Djarum outbid eight other investors late last year for the contract to operate the two hotels. Electronics maker PT Maspion Indonesia, withdrew its bid at the last minute as they could not commit to spending some $150 million to upgrade the rundown unprofitable Hotel Indonesia.

Last year, Hotel Indonesia booked Rp 3 billion in losses. The hotel has struggled to compete with the more upmarket competition, including the neighboring Grand Hyatt Hotel, Nikko Hotel and Mandarin Oriental Hotel.