Raffles Hotel
The Americans move in
Unlike Robinson's attempt, this icon's sudden sale stirs little public debate. By Seah Chiang Nee (Comments follow)
Jul 20, 2005

Probably learning from the Robinson furore, Singapore's 118-year-old Raffles Hotel - with its holding company - had been sold off to Americans with no advance notice of offer to sell.

The landmark institution and all its other assets were sold for a good S$1.72 billion, topping market price by 46%.

There was no prior announcement of an intention to sell, thereby avoiding any possible public arguments that would arise, as with Robinson's case some 18 months ago.

The department store's intention to sell quickly attracted offers from overseas, because of its strong historical name and service reputation. The public reacted strongly against the sale. Staff and customers launched a petition and it was called off.

The Raffles Hotel, regarded as a "Crown Jewel", has not evoked any such public reaction.

One reason is that it was done with prior notice, But another is that Robinson touches on the lives of the ordinary masses more than this love of Somerset Maugham.

Throughout the years, hundreds of thousands had shopped there, loved its service and deeply resented it falling to a foreign owner.

The hotel, on the other hand, caters more to foreign tourists. There's less personal feeling for it other than in a general historical way.

Nevertheless the sale will have an impact.

At a time when public confidence on the economy remains low, the sale of such a landmark institution is bound to raise pessimism. People are already asking: "Why sell the family jewels if things are honky dory? Does it mean the situation is bad?"

The controlling shareholder is the Singapore government. The management has tried to allay the disappointment by saying it's not a loss because the icon will remain an icon, whoever the owner.

One question involves the objective of the new American owner, Colony Capital, for wanting to buy it. Some analysts are asking if it intends to use it to move into gaming in Asia.

Liz Benston, Las Vegas Sun, says analysts say they are unsure what kind of long-term effect this purchase could have on the company's expanding casino holdings in USA - or the company's designs on developing casinos in Asia.

Colony Capital owns the Las Vegas Hilton. Raffles owns 14 of the 41 hotels it operates worldwide under the Raffles and Swissotel brands.

"Our priorities here are first and foremost to act as custodians for the Raffles brand," Colony Capital Asia Chief Executive Grant Kelley said in a statement.

A taste for gaming?

Gaming analyst Jonathan Galaviz, who has worked with Las Vegas casino companies in Singapore, said Colony may leverage the valuable Raffles brand - widely known across Asia for its luxury hotels - in the gaming business.

Singapore, Macau and potentially other regions in Asia are opening up their markets to a significant expansion of casinos, analysts say.

Asians are some of the world's most prolific gamblers and among the most courted high-rollers in Las Vegas.

The Raffles purchase gives Colony "one of the most powerful brand names within the hospitality sector in Asia and one of the best names for expansion internationally," Galaviz said.

It would make more sense for the company to potentially expand the Raffles brand to new gaming properties rather than existing ones, which would have to meet the highest standards for quality and service, he said.

"Colony has built up its (casino) portfolio through acquisitions," he said. "I suspect they will take a while to understand the business they've purchased, operate it for a while and embark on new development thereafter."

Only one Raffles hotel to date, a property in the Caribbean, has a casino.

John Maxwell, a bond analyst with Merrill Lynch, said he wasn't so sure that the Raffles brand will end up being used for or with casinos. "I'm not sure what synergies there are with gaming," Maxwell said.

"Ultimately Colony is an investment fund, not a gaming entity like Harrah's with the longer-term goal of becoming a bigger gaming company," he said.

Maxwell said the deal, like those for other luxury hotels Colony has purchased in recent years, is intended to generate a high, shorter-term return for investors.

Casinos make up only a small part of Colony's assets. The company has bought and sold several luxury hotels worldwide including the Stanhope Hotel, Orchid at Mauna Lani and Hyatt Regency Waikoloa.

Colony has completed $7.5 billion in transactions over the past 17 years involving hotels in 27 countries.

Raffles' latest expansion plans don't appear to include USA. The company had previously announced plans to open hotels in Estonia, China, Thailand, Indonesia and the United Arab Emirates by 2007.
(Incorporates information from Las Vegas Sun)

Comments

soc.culture.singapore
kilometric
Property business is no longer making money for GLCs. It is also becoming too expensive relative to Malaysia, Thailand, China, Indonesia, etc, etc. So many of them will let go cheap or turn into REIT for fast cash.
If Raffles Holding sold Raffles Hotel for S$1.7 billion, they can buy
another 20 cheap "Raffles Hotel" in China or India and make more money.
They just need to inject some cash into these hotels, refurbish the place, and see the money coming in.
In China or India, the hotel occupancy rate is 95% to 100%. Sure make money.

ardeedee
An icon as big as the Eiffel Tower to Paris is sold to foreigners
completely?

Di Da Di
It's cheap even when the price is 68 times above value with regard to paying for brand value, management expertise and systems, 41 hotels across globe, and additonal brand value - the Singapore brand - a value which they said is Singapore - which itself s a brand.

ardeedee
Of course it is cheap - a similar type of heritage valued hotel is the one in HK at Nathan St - The Penensula" which is an icon and by itself would fetch more than 2 billion I would think.

Has it been sold too cheap?
soc.culture.singapore
Dalai Baru
Definitely too cheap!
The buyer will soon sell the prized catch for huge profits. Appears that Capital Land is cash strapped and sorely needed money.

jacksf
I can't believe that SG would let a world famous site be sold to
outsiders. The sale included all, the Raffles and Swissotel brand
names.

lobert
What cannot be sold? Istana also can be sold if the money is right!
Jul 20, 2005