Saigon Hotel in Ly Thuong Kiet Street. The VNR says it will open its door for all investors. — Photo

HA NOI (Biz Hub) — Viet Nam Railways Corporation (VNR) has decided to divest its total State-owned capital from Saigon Hotel at Ly Thuong Kiet Street, the ‘golden land' area in the capital city.

The 1,005-sq.m. hotel belongs to Saigon Commercial Hotel Company Ltd., which has been officially operating since July 2013 as a joint venture of VNR and Ha Thanh Company. The company was earlier managed by Saigon Tourist and its cooperation agreement with VNR ended in October 2012.

VNR holds 50 per cent of the company's registered capital of VND60 billion (US$2.75 million), through its contribution of asset value on the land area, equipment, and land use right on the 1,005-sq.m. spot. Meanwhile, Ha Thanh Company has contributed VND30 billion ($1.37 billion) in cash, which is equal to 50 per cent of the registered capital. They plan to develop an old three-star hotel into a four-star one on a total investment capital of VND180 billion ($8.25 million).

The Dau tu (Investment) newspaper reported that since the company changed its legal entity in 2013, the three-star hotel, which is famous in the capital city, began doing poor business. From July 2013 to the end of 2014, its occupancy rate dropped to between 52 per cent and 58 per cent due to its age-old facilities. The company lost VND3.3 billion ($151,376) in nearly two years: VND600 million ($27,522) in 2013 and VND2.73 billion ($125,229) in 2014.

According to Chairman of VNR Tran Ngoc Thanh, the company had to bear land hiring costs, three times higher than that of the time prior to the joint venture. The hotel's facilities had degraded and failed to attract visitors, eventually leading to reduction in revenue. Meanwhile, it retained its group of staff on pay that was similar to that of its good days.

Before the cooperation with Ha Thanh Company in July 2013, the hotel was seen as a "goose that laid golden eggs." It's reported that it made a profit of VND311 million ($14,266) in the last two months of 2012 and VND521 million ($23,899) in the first six months of 2013.

The VNR said it would open its door for all investors. As the role of a founder, Ha Thanh Company has an advantage as it holds the priority right to buy VNR's State-owned capital at the hotel. — VNS