Roosevelt Hotel Is A White Elephant That Should Be Sold
It was originally the Grand Dame of Madison Avenue but of course they restyled it to the Grand Dame of New York. And that too is a chapter which has ended, for the historic hotel has announced that is it going to shut its doors. It could not withstand the economic shock induced by the pandemic. The hotel market in the United States and Europe suffered by the onslaught of Airbnb and the virus blew to smithereens whatever remained of it. If the government of our beleaguered nation was ever thinking of selling this gem of a property, this is certainly not the right time.
The Roosevelt was where the legendary hotelier, Conrad Hilton, had a presidential suite because he preferred the magnificence and splendour of its rooms over Waldorf Astoria and The Plaza – some of his other cocoons of leisure. Now, it is a rustic old hotel, with “burns on the rugs, peeling wallpapers, and broken tiles in tiny bathrooms.” The grand dame may be decaying now because the management is out of cash to spend on refurbishing but the iconic building is where movies such as “Man on The Ledge” and “Wall Street” were filmed. Its aura of grandeur may be diminishing but it still has a very prime location, only minutes of walk away from the Central Park, Time Square, and the high-end stores on Fifth Avenue. Pray tell, what else do tourists come to New York for? It was once also connected to the Grand Central via an underground pathway. Even now, the station is only half a block away.
In what can be called a business putsch, the Nawaz Sharif government in 1999 got rid of the hotel’s then owner, Paul Milstein, taking advantage of a very shrewd business deal by the PIA’s Investment arm in 1979. While the market value of the hotel was $250 million, PIA exercised its right to buy it as part of the deal for a mere $36.5 million, later even buying out its Saudi business partner for $40 million in 2004 and as part of the transaction also acquired the luxurious Hotel Scribe in Paris. If you were to ask Imran Khan’s late ex father-in-law about companies acquiring assets outside their domains, he would scoff. Sir James Goldsmith was a notorious corporate raider of 1980s who would parse balance sheets in the hope of finding overvalued assets in undervalued companies. He bought Diamond International not to turn the company around, but for its millions of acres of forestland so that he could use the timber to rake a killing.
Zulfi Bukhari and the privatization committee formed by the Prime Minister are acting as corporate raiders too but from the inside. The Roosevelt Hotel might be the jewel in the crown but there are other companies up for grabs. The Services International Hotel in Lahore amongst them as are a plethora of coal powered power plants. There is nothing wrong with any government divesting its assets, going on a privatization spree, and making money as long as vested interests do not take advantage of it. The iron lady of the UK was infamous for auctioning off all the crockery of the British government, as the phrase went at that time. This was beneficial for both the government and private enterprise in the UK in the 80s, because it gave added impetus to businessmen to buy and then sell those companies for a profit thus spinning the wheel of the economy round and round. It is an established fact that governments cannot control the economy, they cannot ensure both the buyers and the sellers needs are met – that is the job of the invisible hand of the market forces.
It is a good initiative of the current dispensation to sell both under-performing and over-performing companies. However, they are doing it for the wrong reasons. Hafeez Sheikh has specifically stated that the money coming in from these selloffs would be used for debt servicing. What baloney! Why should the IMF get its pockets fat at the people’s expense, why not use all these expected funds for the thousands of development schemes Imran Khan has in mind. While the Cabinet Committee made the right decision to cancel the sale of the Roosevelt Hotel for the time being given the current market situation. But the real fear is that the August event might never happen, not because it may or may not be financially feasible for the government but because we have been led to have an emotional attachment to a hotel which for all intents and purposes is just that – a hotel amongst countless others in the world. And that too which has hardly ever been cashflow positive for PIA.
Even the last government was too scared to push the button. In the words of former PM Shahid Khaqan Abbasi at that time, it was part of the “cultural heritage” of Pakistan. Of all the reasons he could have given and all the words he could have chosen, this is what he said! It may be in our collective psyche to bring our nationalism and false sense of pride in all matters, but Pakistan is not like Qatar whose sovereign wealth fund has $300 billion to invest and can afford to buy and maintain the New York’s Plaza Hotel and even St Regis. We are a cash starved, debt strapped country which cannot afford to divest $125 million from our meager resources into a white elephant called The Roosevelt.
The author works in alternative financing on Wall Street, and has a fascination with modern history and politics.