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Amy Chew

NEW World Development's recent addition of 32 hotels to its portfolio through Ramada Hotel Operating Co is part of the group's move to further spread its hotel-chain reach in the US and Asia.

  Ramada has signed a 10-year agreement to manage 32 hotels which are currently managed or owned by Stouffer Hotel Holdings, a high-tariff chain in the United States.

  Stouffer was acquired by Chow Tai Fook, a private company controlled by the Cheng family which is best-known for its chain of Hong Kong goldsmith shops.

  As a major shareholder in New World, Chow Tai Fook's acquisition will give New World control of Stouffer.

  The group will be entitled to the first US$50 million made each year by the hotel chain.

  Ramada Hotel will be entitled to a base management fee of three per cent of the gross hotel revenue and an incentive fee upon meeting performance targets.

  Ramada Hotel expects to make about $15 million profit in the first management year.

  According to New World managing director Henry Cheng, Stouffer, which is a four-and five-star hotel chain, is well known and established in the US.

  ''It is quite famous, well-managed and doing well,'' he said. ''It has about 40 hotels in the United States and Latin America, of which its owns 20.''   Mr Cheng explained that Ramada had been given the management rights to the chain to avoid a conflict of interests between Stouffer and Ramada.

  ''There will be an element of conflict between the two chains as Ramada also has properties in the US,'' he said.

  ''Assigning management rights to Ramada will avoid that conflict.

  ''It will also result in substantial savings if the two chains were to merge together as well as avoiding duplication of manpower.''   The merger will give the combined chains 56 hotels and will enable them to become stronger and more competitive.

  Plans are also afoot to change the name of the hotels.

  ''That is under consideration and being worked at, but it will take some time,'' Mr Cheng.

  ''We might either change the name to Ramada Renaissance or add the two names to the existing name of Stouffer.

  ''We have to discuss this with Nestle, which were the original owners of the chain.''   This is the first time the Cheng family has used Chow Tai Fook to acquire hotel properties, a role which is normally undertaken by its property arm, New World Development.

  According to Mr Cheng, Chow Tai Fook was used to acquire the hotels as it had more cash.

  ''It was for accounting purposes. If we were to charge the hotels' acquisition to New World's books, its bottom line will fall into the negative,'' he said.

  ''The beauty of this all is that New World did not have to incur too much capital outlay to get additional properties.''   Mr Cheng has personally guaranteed that if any accrued fees or payment due to Ramada are not ultimately settled by Stouffer, he will meet the payments.

  Ramada Holdings has agreed to pay Chow Tai Fook a half-yearly fee from its Ramada and Renaissance operations outside the US.

  This fee is expected to be about $8.5 million for the first year.



Ramada looks for Asia-US growth