A private mainland firm is suing the InterContinental Hotels Group for 200 million yuan (HK$245 million), claiming the world's biggest hotel operator by number of rooms mismanaged its hotel on Hainan Island. Sanya Huayu Tourism claims the London-listed IHG overspent on procurement and charged excessively low room rates at its Sanya Huayu Crowne Plaza Hotel in Yalong Bay. Huayu filed its complaint against IHG's China subsidiary, InterContinental Hotels Group Holiday Hotel (China), with the Beijing Arbitration Commission, said Li Tao, Huayu's head of hotel business. 'We have begun legal proceedings against IHG in recent days,' Li told the South China Morning Post. IHG said it was unaware Huayu had taken legal action, but said the company's claims of mismanagement were false. The global hotel operator said it was 'ready to take legal action to protect our reputation and settle the dispute'. 'All accusations in Huayu's so-called statement are completely groundless,' IHG said in a statement. 'We noticed Huayu has been approaching media and stakeholders and disseminating untruths about IHG in the past few months and we are deeply suspicious of Huayu's purposes for doing so.' IHG's operations make it the biggest hotel group on the mainland, with 172 hotels in more than 60 cities and nearly 150 hotels under development. On March 18, IHG launched its first hotel brand targeting Chinese travellers, Hualuxe Hotel and Resorts. Huayu is a non-listed mainland tourism conglomerate engaged in hotels, retail and property, with 10,000 employees, and an annual revenue of more than 2 billion yuan and after-tax annual profit of 100 million to 200 million yuan, according to Li. Li said Huayu had not seen any profits after IHG began a 12-year contract to manage the Yalong Bay hotel in 2005. 'In the past six years, we discovered lots of problems in the hotel,' he said. 'Since 2008, we have found serious problems.' In 2008, a Huayu audit found most items procured by the hotel cost 20 per cent above market prices, Li said. The next year, InterContinental Holiday China and Huayu appointed a third-party auditor to inventory the hotel's assets and found losses of up to 5.02 million yuan, Huayu said in a statement. 'Major asset pieces such as red sandalwood furniture and banquet dining cars were missing,' Huayu said. 'In 2011, Huayu discovered a large refrigeration unit worth 3 million yuan at the hotel was seriously damaged by the low-quality refrigerant used by InterContinental Holiday China and had to be discarded.' IHG said the contract to manage the hotel was terminated on November 30, 'whereby Huayu and IHG mutually agreed to part ways'. 'During the years of co-operation, every decision relating to operation and procurement were discussed by both Huayu and IHG,' the hotel operator said. 'IHG has always strictly abided by the law and has been completely honest.' In 2010, the central government approved a 10-year plan to turn the southeastern island of Hainan into an international tourism hub.