Colombo’s Hilton Hotel will be managed by its parent organisation in the United States and re-furbished to accommodate VVIPs when Commonwealth leaders meet for their summit in 2013, if a proposal now before the Cabinet is accepted.
It was barely four months ago that Hotel Developers Limited, the owning company, was taken over as an “underutilised” or “underperforming” venture in terms of a controversial law. Thereafter, a Competent Authority, who was appointed to oversee the working of the hotel, had recommended sweeping changes to a Cabinet Sub Committee headed by Minister Anura Priyadarshana Yapa.
Mr. Yapa, in turn forwarded a Cabinet memorandum which came up for discussion early this month. The matter was put on hold after at least one senior Cabinet minister raised strong objections. Ministerial sources said yesterday that the recommendations reflected a “conflict of interest” since the CA was closely connected to a Deputy Minister and had other business involvements. “The matter will be studied carefully at a future meeting,” the source said.
Mr. Yapa, acting on the advice of the Competent Authority, has recommended that the Colombo Hilton land and its lease made available to Hotel Developers Limited be converted to weighted capital. Thereafter, he wants the leasing of the land for five-years.
At present, there is a legal tangle over the land. The leasehold land had been obtained on a 99-year lease by Cornel & Company Limited from the Urban Development Authority. It is expected to end only on February 15, 2083. Shares for the full value of the lease rental have been issued by Cornel and Company Limited.
Minister Yapa also wants 40 per cent of the dues to the company by Hotel Developers Limited up to December 31 2011 converted to weighted capital. He has said the rest of the amount could be re-documented for payment.
He wants Hotel Developers Limited to enter into a management agreement with Hilton Worldwide for an 11.75 per cent management fee and collective service charges. This is instead of the previous 33 per cent net operational profit and management fees. The previous management contract between Hotel Developers Limited and Hilton International expired on December 31, 2007. However, management fee then has been accounted as per terms of the agreement without prejudice to the rights of the company. In 2009-2010, management fees amounted to Rs 76.4 million, 187 per cent higher than the Rs 26.5 million paid in 2008-2009.
Mr. Yapa has recommended that the hotel be developed in “a manner that could be used” for the Commonwealth Heads of State meeting in Colombo. Last year, total liabilities of the company crossed the Rs 12 billion mark, up from Rs 10.6 billion a year earlier. |
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