Once an agreement was in place, planning and construction would take about four years to complete if everything went according to schedule.

'We all know the future prospects for Shanghai are very good. If we can enter into appropriate commercial terms, we will try to finish the property as quickly as we can,' Mr Kwok said yesterday.

Last November, Peninsula Shanghai, owned jointly by Hongkong Hotels and Starwaly Properties Group, signed a framework agreement with New Huang Pu Group on the proposed development of a Peninsula hotel on a site near the old British consulate.

Hongkong Hotels at present operates the Peninsula Palace Beijing, in which it holds a 42 per cent interest.

Mr Kwok said Hongkong Hotels had no immediate plan to raise funds following a $1.13 billion share placement made in October last year.

He added the group would limit its development efforts to Shanghai and Tokyo unless other very attractive opportunities emerged.

In Tokyo, the company is planning a 300-room luxury hotel with Mitsubishi Estate, and construction is scheduled to start before the end of the year.

The luxury hotel operator, which owns the Peninsula Hong Kong and Kowloon Hotel, yesterday said its net profit jumped 20 per cent to $351 million for the year to December. Turnover fell 3.08 per cent to $2.51 billion.

Earnings were helped by a $95 million insurance settlement for the loss of business during last year's Sars outbreak.

A final dividend of eight cents was proposed.

Mr Kwok said occupancy rates for its two Hong Kong hotels had recovered.

'Generally, the outlook is pretty good at the moment,' he said.

But he said the Peninsula Bangkok had received a few cancellations resulting from bird flu fears.

Last year, the average occupancy rate at the Peninsula Hong Kong was 53 per cent, compared with 62 per cent in 2002. Average room rates fell 12 per cent to $2,337 per night.

Occupancy at Kowloon Hotel dropped to 69 per cent from 92 per cent in 2002.