(Yicai Global) Sept. 17 -- Property developer Sunac China Holdings and Wanda Hotel Development have agreed to terminate 16 years earlier than planned a two-decade arrangement by which the hotel manager would run 21 Sunac-owned hotels.

Sunac will pay Wanda Hotel and two of its units compensation of CNY133 million (USD20.6 million) and CNY68.6 million (USD10.6 million) to settle all outstanding payables, according to a filing Wanda Hotel made late yesterday. The hotel management firm said on Sept. 10 that Sunac had given notice of the deal’s early termination, citing the impact of Covid-19 and changes in its business strategy.

The pair had agreed in July 2017 that Sunac Real Estate would buy 91 percent of 13 cultural and entertainment projects from Dalian Wanda Commercial Properties for CNY43.8 billion (USD6.8 billion), in exchange for which Wanda Hotel would run the hotels in the projects for 20 years. It was also agreed that Tianjin-based Sunac would pay CNY50 million a year per project in brand license fees.

The fees for managing the hotels amounted to 18 percent of Wanda Hotel's total revenue in 2019, or about HKD150 million (USD19.3 million). It was 11 percent last year, and 9 percent in the first half of this year, equal to revenue of HKD71.8 million (USD9.2 million) and HKD38 million, respectively.

Hong Kong-based Wanda Hotel runs about 100 hotels, and will manage another 152 that are still under development, it said in the filing. The 21 Sunac-owned hotels represent about 19 percent of the firm’s business.

In recent years, Sunac has improved its ability to operate cultural and entertainment projects, and now even has its own hotel management brand, China Real Estate Business reported yesterday, citing a person close to the company.

In March, Sunac Culture and Tourism and China's second-biggest hotel group Huazhu Group set up a joint venture, Yongle Huazhu Hotels Management. There is speculation that the 21 hotels could be run by the JV.

Editor: Futura Costaglione