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Government struggling to sell off lucrative Hotel Forum

One of the most recognisable landmarks in Bratislava, and arguably one of the most lucrative pieces of real estate in the country, the state-owned Hotel Forum is proving a tough sell. Forum owners anxious for money from the sale have been frustrated by their inability to dispose of the hotel in its current form.
The problem is that the government is the owner, and the company through which it controls Forum was set up by the former government of Vladimír Meeiar as a limited liability company - the only state company formed in such a way - which has made its sale a technical and political obstacle course.
"We have to privatise the Hotel Forum," said Ivan Mikloš, Deputy Prime Minister for the Economy. "However, it is not possible to sell it in a standard way because it's a limited liability company, in which the majority owner is the government office, and the contracts with other entities were written in such a way that it is impossible to cancel them. The whole issue is absurd."


Forum, once a Communist-era diplomatic hotel, now weighs heavy on the government's hands.
photo: TASR

One of the most recognisable landmarks in Bratislava, and arguably one of the most lucrative pieces of real estate in the country, the state-owned Hotel Forum is proving a tough sell. Forum owners anxious for money from the sale have been frustrated by their inability to dispose of the hotel in its current form.

The problem is that the government is the owner, and the company through which it controls Forum was set up by the former government of Vladimír Meeiar as a limited liability company - the only state company formed in such a way - which has made its sale a technical and political obstacle course.

"We have to privatise the Hotel Forum," said Ivan Mikloš, Deputy Prime Minister for the Economy. "However, it is not possible to sell it in a standard way because it's a limited liability company, in which the majority owner is the government office, and the contracts with other entities were written in such a way that it is impossible to cancel them. The whole issue is absurd."

Under Slovak privatisation law, state property can only be sold if it is offered directly to a buyer by the state, or is first transformed into a joint-stock company. A limited liability company, such as the one which owns Hotel Forum, cannot, if it is owned by the state, be sold in any way.

Privatisation Ministry spokesman Robert Merva, while pointing out that the hotel's sale would not go through his ministry, agrees that "the privatisation of the Hotel Forum is a big problem."

However, the government has proposed a legal framework for the hotel's sale in a bid to get the privatisation proceeds into the state budget for development projects before the end of its election term in autumn next year. After selling the hotel, the state would then be able to collect taxes from the future owners of what is currently a very profitable hotel.

Modernisation and restructuring

The proposed sale would see the hotel building sold as a physical property followed by the liquidation of the limited liability business enterprise, Hotel Forum Bratislava s.r.o, the statutory representative of which is Tibor Tóth, head of the Office of Government.

The profits racked up by the hotel have been ploughed back into its operations, Tóth explained, to enhance its value before its privatisation. "When I was nominated to the head of the Office of Government I learned that I had a certain legal status which I had to accept and act within, which meant putting effort into improving the hotel's economic performance according to the competencies I had, specified by law. This was my first task. Then, consequently, we began to think how, in what form, we could assure the hotel's privatisation."

The Forum was built during the communist regime at the end of the 1980s and became an official diplomatic hotel, replacing the then Interhotel Devín. In April 1989, it became a member of the international hotel chain Inter-Continental and Resorts.

In May 1995, the HZDS government excluded the Hotel Forum from its privatisation plans. On June 1, 1995 the hotel was taken over by a limited liability company owned by the Office of Government. "This form of business entity for a state company was used only in the case of the Hotel Forum. I do not know what motives led the Meeiar government to this choice," said Tóth.

HZDS member of parliament and legal expert Ján Cuper, speaking to The Slovak Spectator March 14, explained the decision had been taken so that "the state, according to the Commercial Code, could also become a shareholder in various kinds of businesses".

Although critical of the hotel's ownership structure under the previous regime, the present government has admitted that during sale delays, the hotel's value has risen. Since the new government came to power in 1998, Forum's profit has increased fivefold, from 12 million to 60 million Slovak crowns ($1.4 million) per year.

"It is better to privatise a hotel that is economically strong or profitable, since it enables us to command a higher price for it. We have worked for this for the last two years since new management was put in place," said Tóth.

Since 1999, the hotel's profits have been poured into reconstruction. Hotel director Slavomír Čičmanec said: "To remain at our current high level [of service], the hotel has to be reconstructed approximately every five years."

Interest expected

With Tóth convinced the government can overcome the technical obstacles to the sale, he expects significant interest in an eventual tender. However, he is keen to see the government avoid the same scrutiny of its dealings with the hotel that the HZDS government received.

"We have to be careful with the privatisation," he said, adding that the sale would be conducted through a public tender. "We cannot leave space for accusations that we used a method contrary to the letter of the law. The economic ministers [Mikloš, Finance Minister Brigita Schmögnerová, Economy Minister 1ubomír Harach and Privatisation Minister Mária Machová] will meet soon to decide on the final privatisation steps."

Tóth said the two main tender conditions proposed by the Office of Government for a potential buyer will be easier for a foreign than domestic firm to meet. First will be price, to maximise state revenues from any sale. Second, the investor must preserve the hotel's reputation and continue to improve its image.

He added that some foreign firms have already showed interest. "The Hotel Forum is really 'in'," Tóth said, adding that the sale process may begin this autumn.

However, not everyone is convinced that the hotel will be out of state hands before the end of the government's electoral term. Čičmanec, who told the daily Sme last year that the hotel would be privatised no later than 2001, is reluctant to put a date on the sale. When contacted by The Slovak Spectator March 12, he admitted he "no longer [has] the courage to say when it will be done".

The present opposition is still firmly against the hotel's sale. "I am against the privatisation of the Hotel Forum," the HZDS's Cuper said. "I do not think that this plan [to sell to foreign investors] is the best solution, especially if the hotel is profitable [for Slovakia] and serving the public."

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