“Everything has a price” is one of the oldest sayings in business, and it’s a truism. No matter how iconic or valuable an asset might be, if someone can come up with the right price for it, they’ll usually find that it’s for sale. This is true of almost every building and company in London, and it’s certainly true of the famous Ritz Club. It’s one of the most famous hotel and casino complexes in the city – if not the whole country – but if the rumors we’ve heard over the weekend are true, it’s now in foreign hands after a Qatari investor acquired it for approximately £800m.
The possibility of the Ritz being sold was first floated toward the end of last year when the billionaire Barclay brothers officially placed the hotel and its adjoining casino up for sale. The pair bought the business and its assets for what now looks like a bargain price of £75m in the mid-1990s, so a return of ten times their investment would represent a handsome return on a business that has been struggling to return a profit for the past four years. Even if the final price – which is never likely to be disclosed publicly – fell a little below £800m (which had been rumored toward the end of last month when a deal was believed to be close), they’ll still have recouped several times their initial investment through the sale.
As historically significant as the Ritz might be, it ran into trouble during the past few years because the casino side of the business began making losses. While it wasn’t immediately clear whether or not the casino would be included in the sale, a move made by the brothers this past January suggested that it would be. The brothers sank a further eight million pounds into the casino for unclear purposes, but it’s thought that the money was used for immediate renovations and also to clear some of the casino’s debts and therefore allow it to be sold without a new owner having to pick up any additional bills. Spending eight million pounds on a property you intend to sell immediately might not make sense in the majority of cases, but when the returns are this high, it’s easy to see why the Barclays decided the long-term gain was worth a short-term loss.
There are several possible reasons why one of the world’s most famous casinos would suddenly start posting losses, with an increase in regulation and a sudden drop in the number of high-stakes bets being placed by foreign gamblers among them. The most significant, though, is likely to be the rise of online slots websites and online casinos. Ever since the gambling industry went online at the start of the 21st century and online slots websites became available through mobile phones, traditional casinos have been on the back foot. You don’t have to put on your best clothes or pay an entry fee to play UK slots here, and so the convenience of indulging in the hobby in such a way was always likely to be bad news for established casinos no matter how prestigious their brand might be. Even if the casino continued to make losses, though, the remainder of the business makes enough money for the books to balance.
If the sale is now complete, the next question to address will be whether the business is renamed or rebranded. The Ritz is as classic as a brand name gets, and is synonymous with luxury all over the world, but the naming rights to the property will have been sold along with the title deed. The unnamed Qatari investor presumably has other properties across the planet, though, and may want to change the name to fit their existing brands. We don’t expect that to happen, though. To borrow a phrase from the casino world, if we had to put a bet on the matter, we’d say that the name will stay the name now and for many years to come.
The sale of the Ritz comes a few years after the Barclay brothers also sold their stake in the Maybourne Hotel Group. They were the majority shareholders of the group, which owns the Connaught, Berkeley, and Claridge’s hotels in London, until late 2015. Taken together, this might be a sign that the brothers, who are now both in their mid-80s, are beginning to wind down some of their business interests. They retain ownership of the Telegraph Group Limited, which publishes both the Daily and Sunday Telegraph, and they also own The Spectator and Apollo Magazine through their Press Holdings company. There have thus far been no signs that they’re preparing to sell off any of their media empire even if they have decided to get out of the hotel trade.
Should the news of a Qatari takeover be confirmed, it would all to a growing number of famous and highly desirable London properties that are now in Qatari hands. The most well-known of all of them is probably the Shard. The construction of the building may never have been completed at all had the Qatar Investment Fund not come up with just over £1.5bn in 2008 after a disastrous falling-out between the building’s previous owners. Canary Wharf, although many people don’t know it, is also a Qatari holding, and also belongs to the Qatar Investment Authority. The company stepped in when the previous owners faced insurmountable debts in 2009, and then stepped up its investment in 2015 to take control of the entire Canary Wharf group. As we alluded to earlier on, when the Barclay brothers decided to sell their interest in the Mayborne Hotel Group the following year, it was the same Qatari company that bought it. We don’t know if the Qatari Investment Authority is also behind the purchase of the Ritz, but based on past form, it certainly seems likely.
Nobody knows what this might mean for the long term of the Ritz, but in the short term, we’d expect to see a few renovations and perhaps a new marketing campaign coming soon as the new owners look to show off their shiny new asset. For the customers and patrons of the Ritz, though, the news will probably bring peace of mind as they now know they can go about their business as usual without the fear of the company suddenly shutting down.