InterContinental's renovation costs soar

The renovation of InterContinental hotel, formerly known as Ruposhi Bangla and Sheraton, is witnessing escalation of costs and time.

The original cost for renovation was estimated at $43 million (Tk 344 crore) in 2014, which soared nearly 56 percent to $67 million (Tk 536 crore).

The renovation works were supposed to be complete by December 2015 but the five-star hotel is far from ready to open its doors to guests under its new moniker, InterContinental Dhaka.

The costs escalated as the initial estimation had excluded consultation fees, taxes and charges and the scope of work has expanded since, said James P McDonald, general manager of InterContinental Dhaka.

However, Rashed Khan Menon, civil aviation and tourism minister, said the delays caused the increase in costs.

He blamed the delays partly to the militant attack in Gulshan last year, which warded off the foreign consultants out of the country.

State-run Bangladesh Services Ltd, the owner of the hotel, is financing the renovation with its own funds and bank loan.

The renovation works are now expected to be complete in October and three more months will be needed for testing, simulation and commissioning with mock guests, McDonald said.

“By this time we will line up our marketing channels and re-establish other business process as well. We are very much encouraged by where we are right now,” he said.

But Menon said they are planning to go for a soft launch first in October. Bangladesh Services Ltd had signed a 30-year management deal with the InterContinental Hotels Group in February 2012, but the deal will become effective from the first day of commercial operation.

McDonald said InterContinental Dhaka will be a highly profitable venture and it will take hardly 15 years to recoup the investment.

“The other new entrants in the market have invested nearly $100 million and are making very good amounts of revenue -- I expect to have good returns.”

Before Ruposhi Bangla was shuttered in 2014, it logged in net profit of Tk 28 crore for the first eight months of the year.

Its net profit plunged 59 percent year-on-year to Tk 19 crore in 2013 due to political turmoil. In 2011, its profit was Tk 40.12 crore.

Asked why guests will choose InterContinental Dhaka over other options, McDonald said the property will have the latest technology, stylish design, modern furniture and amenities, the most sophisticated security systems and a long legacy of superior hospitality service.

“All that will make InterContinental the most desired destination for business and leisure travellers in Dhaka.”

After renovations the hotel's total number of rooms will come down to 226 from 272. The reason being the room sizes were expanded. The hotel's location is also crucial: all government offices, the central bank, Dhaka's business district and some other important institutions are in the property's vicinity. “Most of the hotels are located in Gulshan or the northern side of the city -- their business and our business are completely different.”

Currently, all the human resources of the hotel are engaged in Bangabondhu International Conference Centre and Balaka Executive Lounge at Hazrat Shah Jalal International Airport and most of them will return to InterContinental prior to its opening, McDonald said.

InterContinental had earlier run the iconic Dhaka hotel from 1966 to 1983, after which Sheraton took over.

Sheraton's contract ended in December 2008 but the government requested it to continue the operations until April 30, 2011 for the ICC Cricket World Cup.

Starwood, the parent company of Sheraton, gave Bangladesh Services Ltd a conditional extension offer in 2009, but there was a disagreement between the two parties over the renovation cost and the fate of the employees. Eventually, Bangladesh Services Ltd took over the hotel's operations, renaming it to Ruposhi Bangla Hotel.