Renovation, location woes lead to financial crisis for InterContinental Dhaka

Heavy spending on renovations and the disadvantaged location of the InterContinental Dhaka, a five-star hotel, have caused significant financial losses for the Bangladesh Services Limited, the parent company of the hotel, despite some recovery following the impact of the Covid-19 pandemic.

At the end of 2022, the accumulated losses of the BSL, which was listed in the capital market in 1984, surged to Tk531 crore.

According to the financial report of the company, it spent Tk732 crore for renovating the hotel by taking a long-term loan of Tk573 crore from Agrani Bank. The loan has amounted to Tk955 crore including interests and non-current loans.

It mortgaged land, building and renovation work materials against the loan.

Officials say the company is experiencing a financial crisis after taking out a loan from the bank to renovate the hotel. Due to the hotel being closed for nearly four years during renovations, the company was unable to generate any revenue from it.

They say the financial crisis has worsened due to the company's obligation to pay a substantial amount of interest on its bank loans.

The hotel's renovation over a four-year period created significant loan repayment issues for the Bangladesh Services Limited. Nonetheless, the company is now making its loan repayment in instalments despite the initial setback, the officials say.

Mohammad Atiqur Rahman, managing director of Bangladesh Services Limited, told The Business Standard that the hotel's location, approximately 15km from Hazrat Shahjalal International Airport, has deterred many foreign guests from visiting.

"The hotel's distance from the airport is having a significant impact on the company. Foreign visitors are increasingly deterred by the delays caused by traffic congestion."

In 2014, the company recorded a profit of Tk3.21 crore prior to the temporary closure of its hotel services for renovation. However, since then, the company has been operating at a loss.

During the fiscal 2021-22, the company suffered a loss of Tk110.95 crore. In the first half of 2022-23, the loss amounted to Tk46.47 crore.

The company's hotel services resumed in December 2018 after the renovation work. The InterContinental Dhaka was launched under the management of the InterContinental Hotel Group.

Earlier, the company used to manage the hotel which was then called Ruposhi Bangla Hotel.

The Bangladesh Services Limited also operates the Balaka Executive Lounge at Hazrat Shahjalal International Airport, BSL Office Complex next to the InterContinental, and the Bangabandhu International Convention Center.

Renovation to maintain international standard

The Bangladesh Services Limited signed a contract with InterContinental Hotel Group (Asia Pacific) to manage the hotel for 30 years.

It conducted the renovation work at a cost of Tk732 crore to implement international standards as per the requirements of the managing company.

Around 80% of the cost was provided from bank loans and 20% from its own fund.

Officials say InterContinental Hotels Group has been operating and managing the hotel in its own style under a management agreement.

The Group is a renowned international hotel management company based in the UK with 6,061 hotels under its management and another 1,853 hotels in the pipeline.

The group has more than 100 years of experience in operating and managing hotels.

Hotel occupancy increased

In FY2021-22, InterContinental Dhaka's occupancy rate increased to 42.20% from 16.37% in the previous financial year.

As per the company data, 80% of the hotel's revenue comes from foreign guests and 20% from local guests.

In FY2021-22, the hotel's revenue was Tk110.21 crore, of which 68% came from the food and beverage segment and 24% from room rent.

Lease contract expires for BICC

The lease contract for the management, maintenance and operation of the Bangabandhu International Conference Center expired on 30 June 2022.

The company got a lease for ten years in 2012 from the Public Works Department.

Now, as per a mutual agreement, the Bangladesh Services Limited will continue the management of the Bangabandhu International Conference Center till a new operator is appointed.