The government has signed an agreement with the New York City Government (NYCG) for the utilisation of the Roosevelt Hotel, owned by Pakistan, on rental for three years.

“It will generate $220 million of investment for Pakistan,” Federal Railways and Aviation Minister Saad Rafique said at a press conference in Lahore on Sunday. “Under the contract, the government of Pakistan has leased out its [Roosevelt Hotel’s] 1,025 rooms, which is 100%, to the local government.”

The development comes after the Economic Coordination Committee of the Cabinet allowed the national flag carrier to sign a contract with the hotel union and the NYCG. It also allowed the withdrawal of pending lawsuits by the hotel with the hotel union and the City of New York pursuant to the terms of the settlement agreement with the union.

The hotel, which opened in 1924, has 1,015 rooms and 52 suites.

The Roosevelt Hotel was shut down during the coronavirus pandemic, which cost $25 million per annum. The country had to pay $20 million worth of dues, Rafique said, and described the hotel union as “very strong”. They had a demand of $66 billion that was yet to be reconciled.

Apart of the amount, the hotel was facing another risk of landmarking twice as it was marked by the city government. Rafique said that such a risk would not have allowed the government to convert it into a major project, eventually decreasing its value.

He lauded the decision of the last cabinet to lead the hotel via a public-private partnership, however, the former government could not continue it.

After announcing the news of the three years contract, the federal minister said that under this there would be a guaranteed business. According to the government’s estimates, it would run for three years and revenue of around $220 million would be generated.

It has been decided that $202 would be the rent per room in the first year, followed by $205 and $210 in the next two years. “So this is a $220 billion amount and the earnings have started. We have handed over 600 rooms in 18 days and in the next 30 days, we will hand over all rooms to the NYCG where they will keep immigrants. A robust security system is there and the hotel will return in the same condition in which it is now.”

He added that after three years the government would pay all the dues. The hotel earned six to seven million dollars during its peak time.

“It is safe,” he said about the hotel’s status and added that the next task was to appoint a transaction adviser based on transparency who will run it under the PPP model as it is a 19-story building whereas it should be a 40-story building. “Its age is over 100 years and a new high-rise building will be constructed. We have saved a precious asset and converted it to an earnable destination.”

Rafique went on to add that the expenses of 479 employees were too much and under the contract 77 would be and the remaining would “go home”.