ISLAMABAD - The federal government Monday broke its silence on the shuttering of Pakistan-owned Roosevelt Hotel in New York with Minister of Aviation Ghulam Sarwar Khan saying that there is no agenda or programme under consideration of the government to sell or dispose of the “iconic” property.

The minister further said that all reports circulating in certain quarters about the prime real estate located in the heart of Manhattan, the financial hub of the world, were mere “speculations and nothing more than political point scoring.”

Last week, the management of Roosevelt Hotel that is owned by Pakistan International Airlines (PIA), the state operator, has said it would shut its doors on guests at the end of this month. “Due to the current economic impacts, after almost 100 years of welcoming guests to The Grand Dame of New York, The Roosevelt Hotel, is regretfully closing its doors permanently as of Oct 31, 2020,” the announcement said.

On the question of closing down of Roosevelt Hotel, the aviation minister in a statement said that the hotel is “currently operational and has valid contracts till December this year with various other airlines.” “Multiple options are being considered for its future and all decisions are made collectively by Hotel’s Board and the Government of Pakistan.” The minister reiterated that no individual or company or business concern can or will be able to influence the decisions or its working. “Every decision shall be taken collectively involving all tiers of the government, with transparency and accountability.”

Explaining the trajectory of PIA’s Roosevelt Hotel, Ghulam Sarwar Khan said that PIA had acquired this 19-storey building in 1979 on partnership from its own profits and as a part of airline’s diversification strategy. Later, in 1999, it acquired 100 percent shareholding from its own resources and without any aid from the Government of Pakistan. The property has more than a thousand rooms and having an area of 43,313 square feet, covering a whole city block centrally located at the heart of Manhattan area of New York. Right after fully acquiring the hotel, PIA undertook renovation of the hotel and it went into profitability straight away which continued till 2018. However, since 2019, the financial position of Roosevelt Hotel has been in the red, despite the fact that it is run by world’s premier Hotel Management Company ‘Interstate’, said the aviation minister.  

The main reason for its downfall is progressive decline of its infrastructure and dilapidated room conditions, further reinforced by the global Covid-19 pandemic, he also said.

It is worth mentioning here that the last renovation of Roosevelt Hotel was done in 1995. Due to severe weather conditions and last renovation undertaken some 25 years ago, its financial performance was in turmoil, he added.

As per estimations, the cost of bare minimum and basic renovation was $32 million whereas full renovations required $110 million, according to the statement of aviation minister. The initials plan for its renovation was devised with a few model rooms also made ready for review and approval. “However, the Covid-19 pandemic posed a big challenged and severely affected the Travel and Hotel Industry Globally, with Roosevelt Hotel, being in the eye of the storm, no exception.”

In Manhattan alone, 183 hotels have closed down, said the statement adding that with limited to no flights to the city during peak Covid days and almost zero occupancy, Roosevelt’s cash flows and revenue streams were badly affected. “The hotel management still tried to utilize the hotel by providing services to staff at discounted rates, but with them gone now, the conditions are bad. “

It would be worth mentioning here that Roosevelt Hotel’s management had obtained a loan of USD 160 million from JP Morgan Bank, the payments of which were being made regularly by the hotel management from its own revenue stream. By the year 2020 the accumulated loan amount payable reduced to $105 million, making regular and timely payments without any default, said the statement.

“However, citing the overall situation of travel and hotel industry, the lender sold off its liabilities to another company which was very much interested in acquiring the hotel for itself.” It started eyeing at calling back the loan during these times and attempting a takeover of the property, the statement said. “This was unacceptable to PIA and Government of Pakistan.”

According to the minister; the PIA Management sensing the possible outcomes, convinced the government to intervene by paying off the loans in one go and getting the asset secured for the country. Deliberations were made in this regard and finally on the recommendations of Ministry of Aviation and Ministry of Finance, the government authorized National Bank of Pakistan to take up this loan liability against the hotel, freeing it from any foreign influence or control, the statement concluded.