Arabian Business Weekly Update 28th September 2004

Saudi Prince Alwaleed is attempting to buy the Savoy hotel. But he may be paying too high a price.

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By  Anil Bhoyrul Published  September 27, 2004

Editorial Leader|~||~||~|

Eye off the ball

Nobody likes to criticise the business brilliance of Saudi Prince Alwaleed Bin Talal. He didn’t become the world’s fourth-richest man, with an estimated US$20 billion fortune, by making bad decisions. But I fear he may have just made one. The colourful prince is negotiating the purchase of London’s fabulous Savoy from its current owners, for a price reportedly in the neighbourhood of US$467 million. The 47-year-old prince has teamed with HBOS Plc’s Bank of Scotland to buy the 115-year-old hotel from Quinlan Private, the investment consortium that bought the Savoy last May. If the deal goes through, Fairmont (owners of the Fairmont Dubai) will assume the management responsibilities of the Savoy in January 2005. Around US$48 million in major improvements will be needed. There is no denying the sheer magic of the Savoy. Its architecture, it’s A list of royal and celebrity guests and its quality of service have made it a worldwide institution, the ultimate “must have” for hotel owners. But is Bin Talal getting a little carried away this time? No exact financial breakdowns are released for the Savoy’s profits, but in 2003, London hotel profits declined by 13%. This compares with an average fall of 12% for European hotels as a whole. Running costs are soaring at the Savoy, and visitor numbers dropping. Whichever way you look at it, the Savoy, and the industry as a whole, is suffering. All of which defies Bin Talal’s basic rule of investment. He specialises in finding disasters and turning them into successes. Take EuroDisney and Citigroup as prime examples, where, for a relatively small investment, Bin Talal has made billions. Reports suggest Bin Talal is keen to close a deal this month. He is still fuming after missing out on his bid for the second Saudi GSM license, and wants to be back in business action. But any analyst will tell you that the Savoy, based on visitor numbers and asset valuations, is worth no more than US$425 million. For once, the Arab world’s greatest businessman may have taken his eye off the ball. ||**||

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