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Hotel partners split over `values'

"We have taken this decision only after exhausting all possible means with which to persuade the owners to abide by the management agreement."

Kendall Oei, director of General Hotel Management

After five years of cooperation, Singapore-based General Hotel Management Ltd (GHM) yesterday announced it is to terminate its management agreement with the upscale resort The Lalu (涵碧樓), citing unbridgeable gaps in their operational values and constant interference from the hotel's owners.

"I am sad to announce that as of 12:01am on Nov. 24, GHM will no longer manage The Lalu Sun Moon Lake Taiwan ? we have taken this decision only after exhausting all possible means with which to persuade the owners to abide by the management agreement," said Kendall Oei, director of GHM, during a press conference in Taipei.

Described as the group's first divorce from any of its worldwide management partners, Oei said they had to announce the breakup as The Lalu's owner, Taichung-based Shining Group (鄉林集團), exerted incessant interference in finances, hiring and firing of staff and operational practices, preventing GHM from helping the the hotel to reach its true potential.

Opening its doors for business in March 2002, The Lalu has become one of the most famous resort hotels in Taiwan, receiving several prestigious awards including the honor of being listed in Conde Nast Traveler magazine's hot list for 2003.

"GHM is a victim of bad faith in the situation and will seek arbitration under Taiwanese law to ensure that justice is done," he added.

Despite the setback, Oei said that GHM has been in talks with several other hotel groups in Taiwan and expects to announce a new partner soon.

In response to GHM's accusations, Lai Cheng-i (賴正鎰), head of the Shining Group and chairman of The Lalu, blamed the Singaporean company for failing to satisfy customers' needs and not achieving the operational efficiency that was stipulated in their original contract.

"In particular, GHM transferred all the staff that we had spent time cultivating to other hotels, seriously affecting our process of internationalization," Lai said during a phone interview.

As the management team remains unchanged, Lai said, The Lalu's style, service quality and profitability will not be affected by its breakup with GHM.

The Lalu is estimated to rake in after-tax profits of NT$350 million (US$10.4 million) this year, up from last year's NT$300 million, Lai said.

After bidding farewell to GHM, The Lalu will immediately introduce the management expertise of the UK's Amayi, in which Lai's investment over the past year has made him their biggest shareholder. He refused to disclose his shareholding in the hotel management company.

With the help of Amayi, Lai expects to establish 30 hotels at home and abroad over the next decade, with projects already underway in Hualien and Taichung, as well as others in Beijing, Suzhou and Shanghai in China.

The Shining Group plans to issue real-estate investment trusts (REITs), priced at NT$2 billion each, in Hong Kong starting early next year to raise capital for its business expansion in China, Lai said.

The split with GHM, however, will not adversely affect the Shining Group's cooperation with the Aman Group, the parent company of GHM, in developing its yet-to-be-constructed hotel complex in Beijing's Forbidden City.

"I cannot speak for Aman, but I'm sure that our chairman, who is also the chairman of Aman, will be surprised to hear about this," Oei responded.
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