The Sheraton Hotel, an important landmark of Pakistan's biggest city, is due to close this year because of the poor security situation and other constraints including a drastic drop in occupancy rates and dwindling profit margins.
Starwood Hotels and Resorts Worldwide, which runs the Sheraton chain of hotels, have confirmed they are closing down their branch in Karachi from December 31.
According to market reports, the owners of the building which houses the Sheraton hotel decided to end their long standing contract with Starwood Hotels and Resorts since it was running into losses and even the royalty fees were not recoverable.
"This development is not surprising because the security situation in Karachi has resulted in foreign guests not even contributing five per cent of the total guest occupancy in upscale hotels including Sheraton," one official at a four-star hotel told PTI.
A precarious law and order situation in the city and the security issues in Pakistan has seen foreign investment drop significantly in the last five years.
Foreign investment, according to the Board of Investment, dropped from USD 5.2 billion in 2007-08 to USD 1.4 billion in 2012-13.
But the good news for Karachites and the hotel industry is that the Arabian Sea Enterprises which manages the hotel building for Kuwait investment authority has signed a new deal with the Switzerland based Movenpick Hotels and Resorts Ltd.
An investment banker who regularly plays host to businessmen from abroad said the exit of Sheraton hotel from Karachi's hospitality industry would send a negative message abroad.
"The Sheraton and the Pearl Continental hotels have long been distinctive landmarks in Karachi and hosts to foreign investors, dignitaries, teams and other high profile personalities but are now suffering losses because of low occupancy brought on by the security issues," he said.
The two hotels are located near the Chief Minister's house on the famous PIDC road in whose vicinity some terrorist attacks have taken place in recent years.
In 2002, militants bombed a bus at the Sheraton hotel carrying French naval engineers while two years back a suicide attack took place at the CID headquarters in the same vicinity.
The two hotels which were once favourite haunts for the business community and the yuppie crowds are today like fortresses due to the security concerns.
To get into these hotels one has to pass through several security checks which actor Ali Saleem says has robbed them of their charm and prestige.
"In the past one could drop in late night and spend time in the coffee shop chatting with friends or for meetings but today it is not worth worthwhile going through all the security hassles," he said.
