Are Ritz London owners hinting at possible sale?

Could one of London’s most historic and iconic hotels be hitting the market? A new report from the Times suggests British billionaire twins Sir David Rowat Barclay and Sir Frederick Hugh Barclay are gauging interest from “potential suitors” for the city’s Ritz Hotel. The hotel’s suggested valuation reportedly is £800 million—or £6.1 million per guestroom.

The brothers acquired the property for £75 million in 1995, and an anonymous source told Reuters the siblings had received “several unsolicited offers” for the asset after nearly 25 years of ownership. The publication of the valuation was a “significant hint” from the twins, the source told the wire service.

The brothers may have good reason to seek a buyer: Earlier this week, the Times reported the hotel’s pretax profits fell to £7 million last year from £12.8 million in 2017, while the basement casino lost £8.9 million last year—an improvement from 2017, when it lost £11.7 million. However, sales at the hotel reached a record £47 million in 2018 (up from £46 million the previous year) and operating profit last year reached almost £15 million, up slightly from £14.5 million in 2017. 

Real estate expert Paul Olliff told Reuters the property's £800 million valuation “relied more on the hotel’s prestige than on its financial performance,” and could make a sale difficult. “However, given it will be classed as a ‘trophy asset,’ buyers might not be put off by a financial performance that doesn’t reflect the sale price,” Olliff, a legal director at law firm Ashfords’ real estate team, told the wire service. He added that the valuation should not “be seen as an indication of the buoyant hotel market in the U.K. in a wider context.”

A Buoyant Market?

While slower than in Q1, transaction activity in London remained strong in Q2, with £2.1 billion worth of deals completed in the 12 months to Q2, up 54 percent on the previous year. In spite of the looming Brexit, the city's hotels are still going strong. July's revenue per available room was a recent high at £185.14, driven by room occupancy of just under 90 percent and an achieved average room rate of £206.90.

Across the U.K., investment volume in the 12 months to Q2 was down 26 percent from the 2018 period, but the country remained the largest hotel investment market in the region, capturing 26 percent of capital deployed, according to CBRE. It noted single-asset sales grew 44.5 percent but portfolio sales dropped 53 percent in volume.

The Ritz London opened in 1906 under the auspices of Swiss hotelier César Ritz, the former manager of the city’s Savoy Hotel. A representative of the hotel declined to comment on the rumored sale.