S K Air said it is hoping to salvage its 25-year investment contract to renovate and run the Grand Hotel in Siem Reap.

The Ministry of Tourism announced on Oct 13 it was to invite international tenders for the work after revoking the deal signed with Thai-owned SK Air in November 1991.

But in a reply two days later SK Air, said it was hoping to have talks to "resolve this situation in a manner satisfactory to all parties."

A press release signed by SK's Director of Hotel Operations Rudolf Knuchel was issued to "clarify the confusion."

It said: "While we greatly regret the course of action which has been chosen, we recognize and respect the decision of the government of the Kingdom of Cambodia.

"We remain committed to the economic and infrastructrual development of the Kindom of Cambodia, the province of Siem Reap and in particular to the importance of the Grand Hotel d'Angkor and the Villa Apsara. Should the competent authorities allow, we will continue to pursue our interest in these properties in the future."

The Ministry said it acted after Thai-owned SK Air failed to carry its obligations in a 1991 contract to develop the Grand into a 300-room hotel of international standards.

SK Air, partners of state carrier Kampuchea Airlines, blamed a "number of factors, including the unfortunate security situation" for its failure to begin work.

In March SK Air told the Post of $3 million plans to renovate the $70-a-night Grand and add a further 110 rooms. Work was supposed to have started in mid-1994.

Like most major hotels, the Grand has remained under government ownership after the dissolution of the State of Cambodia.

Tourism Minister Veng Sereyvuth said: "Like the Royal Hotel in Phnom Penh, the Grand Hotel is a national and has outstanding potential for restoration and redevelopment as a grand historic hotel.

"The continued failure of the 1991 project was very damaging to the prosperity of Siem Reap and reflected badly on the image of Angkor.

"Given improved security there is a looming room shortage in Siem Reap and it is vital to get a prestige redevelopment of the Grand Hotel underway as soon as possible."

He sought to reassure investors that they would be dealt with fairly by the government.

"I am sure that every major investor has had to deal with the problem of being caught in a contract with a defaulting party and they will understand the difficulties involved," he added.

The news has caused some uncertainty in the travel trade. Another industry source in Phnom Penh said: "Luckily we don't have any guests going up this week, we will have to try and find out next week what's happening."

The Ministry of Tourism statement said the hotel would remain open for "business as usual", its staff would be retained, and named the new manager as Thong Koum Thol.