Friday, April 9, 2010

Raffles Hotel to get new look after sale

AFTER three changes of ownership in seven years, the iconic Raffles Hotel looks headed for a makeover after its pending sale to a Qatar sovereign wealth fund.

Qatari Diar, which is expected to assume ownership of the hotel by early next year, is looking to fund an earlier-announced extension to the hotel that envisages almost doubling the number of guest rooms.

Last April, Saudi Arabian investment company Kingdom Holding obtained the nod from the Singapore authorities to redevelop the hotel’s shopping arcade to make space for as many as 78 additional guest rooms.

Qatari Diar is trying to put a figure on the cost of refurbishing the hotel and revamping its adjacent retail and leisure activities, reports The Times of London. The cost is said to be as high as US$100 million (S$140 million).

Kingdom Holding formerly held a 58.1 per cent stake in Fairmont Raffles Hotels International (FRHI), which in turn owned Raffles Hotel, along with about 100 hotels around the world.

But its stake in FRHI was diluted to 35 per cent earlier this week when Cayman Islands-based Voyager Partners – a private investment company affiliated to Qatari Diar – acquired new shares equivalent to 40 per cent of FRHI’s capital.

According to The Times of London, the terms of the proposed sale of the hotel include a long-term management contract allowing Fairmont Raffles to continue running the Singaporean landmark for the foreseeable future.

The chairman of Kingdom Holding, Saudi billionaire Prince Alwaleed Talal, told Bloomberg Television on Monday that Kingdom Holding teaming with Qatari Diar – which already has a portfolio of hotels in countries like Egypt and Syria – will boost Fairmont Raffles’ management business.

‘(Qatari Diar) will supply us with a maximum number of hotels that will add to our income stream… Consequently, when we go public, hopefully in the next two to three years, this will add dramatic value to us,’ he said.

Qatari Diar, which is the principal real estate entity of the Qatar Investment Authority, has a portfolio that includes a US$329 million mixed development investment in tourist destination Sharm El Sheikh in Egypt.

As part of Qatari Diar’s US$847 million purchase announced on Monday – which includes the 40 per cent stake in luxury hotel chain Fairmont Raffles worth US$467 million, and US$275 million for Raffles Hotel – it will provide Fairmont Raffles with about US$105 million worth of future management contracts for hotels operating under the Fairmont Raffles brands of Fairmont, Raffles or Swissotel.

Last April, The Times reported that Fairmont Raffles was looking to sell Raffles Hotel for up to US$450 million and speculated that Prince Alwaleed might consider disposing of assets after incurring investment losses, but this was denied by Kingdom Holding at the time.

Chesterton Suntec International’s research and consultancy director, Mr Colin Tan, said that Raffles Hotel might be gearing itself up for an influx of sophisticated visitors following the opening of the two integrated resorts.

‘Raffles Hotel might be trying to capture a niche market of foreigners who appreciate the history and significance behind the hotel. It might be differentiating itself to grab quality visitors,’ he said.

Source: Straits Times, 9 Apr 2010

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