By Kate O’Keeffe
Of DOW JONES NEWSWIRES
HONG KONG (Dow Jones)–Sands China Ltd. (1928.HK) is in talks with InterContinental Hotels Group PLC (IHG) to manage two hotel towers at its over-US$4 billion expansion project in Macau amid a failed agreement with Shangri-La Asia Ltd., a person familiar with the matter said Thursday.
The comments came after the Las Vegas Sands Corp. unit earlier Thursday said in a statement to the Hong Kong stock exchange that it had terminated a hotel-management agreement with Shangri-La to operate the hotels and had already begun talks with another unnamed international hotel brand with a “comparable sales and marketing network and customer base.”
Sands China didn’t say why the agreement with Shangri-La was terminated but said the decision was agreed upon by both companies and that it had been resolved in an amicable manner.
Shangri-La’s director of corporate communications Maria Kuhn said the reason the agreement was terminated was “the current status of the hotel developments,” without elaborating. She also said the original contract for the hotels, which would have operated under the Shangri-La and Traders brands, was signed in late 2005 and that the agreement was terminated by mutual consent Tuesday.
Another person familiar with the situation said Shangri-La wasn’t in favor of Sands China’s plan to open the long-delayed project in Macau’s lucrative Cotai area in phases and that the hotelier preferred to have all of the hotel rooms opened at the same time and turned over to them for management. The person said Shangri-La was worried its brand could be hurt if preparatory work were being carried out in rooms near where guests were staying.
InterContinental Hotels Group declined to comment.
The hotels will be part of Sands China’s newest casino-resort project, known as sites 5&6, whose construction has been slowed by a government-imposed labor shortage. The company, after announcing several delays, has said the project’s completion date isn’t currently determinable with certainty given the inadequate amount of construction workers, though it said it “remains committed” to opening an initial phase of the project by the end of this year. Analysts have said they expect the first two phases of the project to begin operations in mid-2012.
Las Vegas Sands said in October it had signed a ten-year alliance with InterContinental that would see the company’s Venetian and Palazzo properties in Las Vegas become affiliated with the group’s InterContinental brand. InterContinental’s brand portfolio also includes names such as the Crowne Plaza and Holiday Inn.
In Las Vegas Sands’ Annual Report filed March 1 it said it was trying to amend management agreements with Starwood Hotels & Resorts Worldwide Inc. (HOT) and Shangri-La to provide for new opening timelines but that “if negotiations are unsuccessful and Starwood and Shangri-La exercise their rights to terminate their agreements, we would have to find new managers and brands for these projects, and such measures could have a material adverse effect on the Company’s financial condition, results of operations and cash flows.”
Sands China’s Thursday statement said the termination of the Shangri-La management agreement would not impact the company’s operations and that its management agreements with Starwood to run hotels in the new development under the Sheraton and St. Regis brands remain in place.
Las Vegas Sands spokesman Ron Reese declined to comment on the status of the company’s discussions with Starwood.
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