Kempinski Hotels said its plan to operate the Ryugyong hotel in Pyongyang, North Korea, is on hold amid rising political tensions.
The Geneva-based Kempinski Hotels confirmed to HOTELS on Friday that Key International, its joint venture partner in China with Beijing Tourism Group to operate the 150-room hotel, has not reached an agreement with the North Korean government because “market entry is not currently possible,” although Kempinski would not get into specifics on why.
“There are many issues to be taken into consideration when negotiating a contract,” said Maria Kuhn, vice president of public relations, Kempinski Hotels.
Had the project gone forward, it would have marked the first time a Western hotel company would be allowed to operate in the totalitarian communist nation. Construction of the Ryugyong building, the tallest in Pyongyang, began in 1987 but the building had been languishing unfinished since 1992 when the fall of the Soviet Union sent North Korea into an economic crisis. Construction on the distinctively pyramid-shaped building, sometimes referred to derisively as “Hotel Doom” in the Western press, resumed when Orascom Telecom Media & Technology Holding, Cairo, agreed to fund the completion of the development for a reported US$180 million after launching the Koryolink mobile phone network, of which it owns a 75% stake, in North Korea in 2008.
Despite the country’s political isolation North Korea does conduct trade, primarily with China and South Korea, and is developing special economic zones to lure foreign investment. North Korean exports totaled US$2.5 billion in 2010, according to the CIA World Factbook.
However, tensions with South Korea and the U.S. have sharply escalated since North Korea conducted a third nuclear test in February. This week North Korea said it put its rocket units on standby after the U.S. conducted drills in South Korea with its nuclear-capable B-2 bombers.