Colony Capital To Buy Raffles, Swissotel Hotel Brands

In a move that could and most likely will affect business travel to Asia, Colony Capital LLC of Los Angeles in mid-July announced it had entered into an agreement to purchase all of the hotel interests of Raffles Holdings Limited of Singapore for nearly $1 billion.

Those interests are 15 Raffles Hotels & Resorts properties, and 26 Swissotel Hotels & Resorts properties in 35 destinations. Colony, a private, investment firm, focuses primarily on real-estate-related assets and operating companies.

Among hotels in the transaction, expected to close by year-end and subject to shareholders' approval, is the iconic Raffles Hotel Singapore, one of the world's most fabled properties and greatest hotel assets, and the cornerstone of Singapore's hospitality industry.

While Colony executives declined to say, at this early juncture in the acquisition process, in exactly what ways things would change for business travelers to Asia, they did talk enthusiastically about the move itself—emphasizing all operations would be maintained under current flags in conjunction with looking for chances to selectively grow the business, particularly in Asia. It is a prospect filled with promise for current and future business travelers to that part of the world.

"Our strategy with the business fundamentally revolves around brand positioning and extension," said Grant Kelley, CEO of Colony Capital Asia. "Our priorities here are first and foremost to act as custodians for the Raffles brand. Next, we are committed to the continued growth of the Raffles and Swissotel brands over the years ahead, and support their commitment to unparalleled world class standards of products and service."

Thomas Barrack, Colony's founder, chairman and CEO, said, "We are honored to become the custodian of one of the finest hotel chains in the world and a true national treasure of the people of Singapore. The properties' success is clearly attributable to the dedication and professionalism of its management and staff. We deeply respect the historical significance of the Raffles Hotel Singapore and consider it our responsibility to protect that legacy," he noted.

That legacy began when four Armenian brothers from the Sarkies family founded the colonial-style Raffles Hotel in 1887, naming it in honor of Sir Thomas Stamford Raffles (1781-1826), the British governor who established modern Singapore on Jan. 19, 1819. The hotel was restored between 1989 and 1991.

The Sept. 11 attacks in the United States, a terrorist attack on the Indonesian island of Bali in 2002 and the reaction to the outbreak of severe acute respiratory syndrome in China in 2003, all impacted a good deal of Asia's hotel industry deeply and negatively. However, Raffles Holdings' decision to sell its hotel assets comes as a hotel recovery and renewed buyer interest in global hospitality is underway in Asia.

Jennie Chua, president and CEO of Raffles Holdings, who has agreed to remain chairman of the Raffles Hotel Singapore, explained that her company simply didn't have resources to compete on a global scale, lacking the investment funds, projected at $2 billion, needed to assure an appropriate ROI to shareholders. The sale reflects good timing for Raffles Holdings, Chua acknowledged, since the company had started making a profit again in 2003, the same year it had begun to trim costs after losing money for years.

Proceeds from the Colony deal will boost Singapore-based CapitaLand, Southeast Asia's largest property developer and 60 percent owner of Raffles Holdings, which will reinvest its share in higher-growth businesses to improve ROI, said Leong Wai Leng, deputy CEO of Raffles Holdings.

Raffles has the option to buy back the hotel after 82 years. In the interim, Raffles Holdings still will own certain assets, such as antiques and memorabilia, which may be displayed by Colony.

Since 1991, Colony has invested more than $15 billion in more than 8,000 assets.