The Barclays and London hotels: what next?

The gleaming art deco design of Claridge's helps to make it a real trophy asset for the Barclay brothers

The credit crunch is bad news for some but good news for others.  The Barclay brothers are among those who have turned others’ distress to their advantage, buying up luxury hotels and becoming the owners of some prime assets in the London market.

Their roots in the trade go back to the 1970s when they started out converting boarding houses into hotels.  Their ambition soon outgrew that strategy; in 1970 they bought the Londonderry on Park Lane, in 1975 they acquired the Howard Hotel (subsequently sold to Swissotel), and in 2001 they bought The Ritz, later adding The Cavendish Hotel to their portfolio.

This year, they swooped on Maybourne Hotels in January, taking a 25% stake. Maybourne owns Claridge’s, The Connaught, and The Berkeley, but it’s been nearing financial crisis (it was a vehicle set up by Irish entrepreneurs Paddy McKillen and Derek Quinlan to take advantage of cheap credit, but during the credit crunch, its weaknesses were exposed).  The Barclays later grew their stake to 64% and have also bought up the group’s £700m of debt from NAMA, the Irish state bail-out agency.

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The rooftop pool at The Berkeley: will it survive the takeover if the Barclays go on a cost-cutting drive?

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However it’s fair to note that though the Barclays have a long term commitment to the hotel industry, they are not averse to trading their assets if the price is right.  They bought the Londonderry for £2.6m, sold it in 1979 for £9.5m, and bought it back in 1984 for £18m.  Currently, they have been boasting about the number of unsolicited bids they’ve received for The Ritz – could they be on the verge of selling?  There are also rumours that they’ve put the Cavendish on the market.  Or are they just telling the world about these offers to ensure their bankers keep funds flowing?

What will the acquisition of these hotels mean for hotel guests?  This blog has already taken a slightly pessimistic stance on their takeover of Maybourne - but maybe we’ve been a touch unfair.

The Barclays have proved careful owners in the past; they revived the Ritz, for instance (despite its utterly ridiculous WiFi tariffs) and have not been the kind of owners who run a hotel down to make a quick profit.  They are typically long-term investors.  However, as we blogged about previously, there are fears they may introduce WiFi charges in their newly-acquired hotels just like at The Ritz, which would be a significant backward step.

The Connaught is another prize asset now under the Barclays' ownership - well known for its outstanding bars and restaurant

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On the other hand, they’re also not the type to make radical changes.  They are property owners, not hospitality operators, by nature different from hoteliers like Ian Schrager or (on a smaller scale) Fergus Henderson, who come from what you might term the “guest experience” side of the business and who have ideas about creating something entirely new.

The Barclay brothers are acquiring excellent existing brands – so I very much hope they don’t change anything much and try their best to follow the maxim of “If it ain’t broken, don’t fix it.”

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Photo credits: Claridge’s, The Berkeley Hotel, The Connaught Hotel.

Tagged as: Claridge's, Connaught Hotel, Maybourne Hotel Group, The Berkeley, The Ritz Hotel