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Majestica Hotel in Shanghai

In: Business and Management

Submitted By smalerva
Words 5235
Pages 21

On March 20, 2005, Richard Roy, executive vicepresident of Majestica Hotels Inc., was in China, for negotiations with Commercial Properties of Shanghai Limited (CPS). They were discussing a possible management contract under which Majestica would be the operator of a new luxury hotel there owned by Shanghai Industrial Holdings.
Majestica Hotels Inc. was one of the world’s leading operators of luxury hotels. The expansion into mainland China had been on management’s agenda since 1999. The opportunity emerged in late 2003 when a close friend of Majestica’s chief executive officer (CEO) revealed that CPS was looking for an operator for its new luxury hotel under construction in Shanghai. Majestica immediately sent representatives to Shanghai to explore the possibility of becoming the operator.
Majestica’s proposal was welcomed by CPS, and a letter of intent was signed on August 20, 2004.
However, in discussions regarding the management contract, the two parties had reached a deadlock. The key issues to be resolved were the contract term, and the responsibilities and rights of Majestica as the operator, and CPS as the owner, of the hotel.
This Shanghai deal was important for Majestica’s global expansion. It would not only provide Majestica with the opportunity to enter the China market but could also set a precedent for Majestica’s future expansion in other emerging markets.

Majestica was founded in 1970 in Western Europe. It focused exclusively on its niche of developing and operating luxury hotels with 200 to 450 rooms. In 1977, Majestica expanded to the United Kingdom. In 1984, Majestica entered the U.S. market via acquisition. Majestica’s expansion in the U.S. market continued with properties in seven other major cities. By the end of the 1990s, Majestica had secured a strong position in the luxury...

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