Djarum wins bid to manage Hotel Indonesia

Rendi A. Witular, The Jakarta Post, Jakarta

Indonesia's third largest cigarette company, PT Djarum, appears to have won a government contract to manage the legendary, state- owned Hotel Indonesia and Hotel Wisata in Central Jakarta for the next 30 years.

Djarum is now the only contender after eight other bidders, including electronics producer PT Maspion Indonesia, withdrew at the last minute because they could or would not commit to spending around US$250 million to upgrade the rundown, loss- making hotels.

Djarum and the government must agree on the profit-sharing ratio before any contract is signed.

Office of State Minister of State Enterprises logistics and tourism deputy head Ferdinand Nainggolan said Monday that Djarum had agreed to initially spend around Rp 1.7 trillion ($204 million) upgrading the hotels under the build and take over (BOT) scheme.

He said that under the scheme, Djarum would renovate and manage the two hotels for 30 years before returning them to the government.

Ferdinand said the government wanted around 70 percent of the profits.

"We are still negotiating the revenue sharing scheme and we expect that by the end of this year the contract can be signed," he said.

The five-star Hotel Indonesia has struggled to compete with more upmarket competition, including the neighboring Hotel Grand Hyatt.

Last year, Hotel Indonesia booked a Rp 3 billion loss.

Under the proposal submitted to the ministry, Djarum also plans to spend additional money building a new shopping mall that would connect Hotel Indonesia and Hotel Wisata.