KARACHI: A Karachi icon, the majestic Sheraton Hotel, will close its doors in December this year in what will definitely be seen as a big setback to the efforts of the Nawaz Sharif government to restore international investor confidence in the metropolis.

The famous property will be taken over by the Swiss chain Mövenpick from Jan 1, 2014, officials said on Tuesday.The news broke as Prime Minister Nawaz Sharif was in Karachi and addressed important meetings, including a big gathering of Karachi business leaders, and told them to help his government restore confidence.

The decision to end the deal with Starwood Hotels and Resorts, which runs the Sheraton brand across the world, has been taken by the Arabian Sea Enterprises Ltd., the owners of the Sheraton Karachi Hotel, which has decided not to renew the contract with the former after it ends on Dec. 31, sources familiar with the development said.

Instead, the company, owned by the Kuwait Investment Authority (KIA), has decided to enter into a 15-year deal with Mövenpick Hotels and Resorts – a Swiss-based international upscale hotel management company represented in 24 countries with 79 hotels, resorts and Nile cruisers in operation. “Mövenpick Hotels and Resorts have finalised a management agreement with Kuwait Investment Authority (KIA), the owner of the hotel, to operate the property from January 1, 2014,” Toufic Tamim, Vice President Sales and Marketing – Middle East and South Asia of Mövenpick Hotels and Resorts.

The hotel will be renamed as Mövenpick Hotel Karachi.Tamim said the company plans to refurbish key areas of the hotel next year, and keep as many employees as possible.“As a Swiss company with a strong expansion strategy across Asia we consider Pakistan to be an important market for our brand development,” he added.

“We are in the process of transition, and we would like to welcome the incoming operator Mövenpick and wish the best to Starwood, who have served this hotel and the city for 30 years,” Sikander Mahmood, chief executive officer of the Arabian Sea Enterprises Ltd.


“The move will help protect the interests of the more than 600 employees of the hotel,” he said.The 16,487 square yard property, which with 407 rooms is the biggest hotel property in Pakistan, has operated as Sheraton Hotel since 1982.

“The main reason for not renewing the contract with Starwood was that Mövenpick offered a deal which had softer terms and was more lucrative financially,” a source with the direct knowledge of the deal said.

“It has been a tough time for the hotel industry after 2005, and the economic meltdown coupled with growing security concerns as well as unfavourable government policies has forced the owners of the hotel not to extend the contract with Sheraton, and hence they have opted for a deal which has softer terms and is more lucrative financially,” said the source.

He added that in 2005, the revenue from international guests made around 8-10 percent of the hotel’s total revenue, but the number has now fallen to less than 1 percent.“Even the international airlines are not coming in overnight — the revenue decline is massive,” he said, adding if the situation had been feasible, the company would have not thought twice and renewed the contract with Sheraton.

Representatives of the Sheraton Hotel in Karachi as well as the Starwood in Dubai declined any official comment, but Mövenpick as well as the Arabian Sea Enterprises confirmed the report.Toufic Tamim said the move was in line with the company’s development strategy to secure projects in key and emerging Asian markets.

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