US owner to break up Savoy chain

Landmark London hotels put up for sale
Click to follow
THE SAVOY Group is to be broken up by its US owner, Blackstone Group, in an attempt to recoup some of the pounds 520m it paid for the hotel chain last year.

It is understood that the Americans are ready to sell the Berkeley Hotel and the Connaught and may even entertain offers for Claridge's, leaving just the flagship Savoy Hotel overlooking the Thames left from the prized portfolio.

Blackstone, a US investment fund, has already talked to Sir Rocco Forte about selling the 160-room Berkeley Hotel in Knightsbridge to Sir Rocco's RF Hotels. However, the deal foundered on price, with the Americans wanting more than pounds 150m for the five-star hotel, which boasts two of London's leading restaurants, Vong and La Tante Claire, and is a favourite of top businessmen.

A leading hotelier told The Independent on Sunday: "Though the Berkeley is not formally up for sale, it's well known to be available."

Similarly it is understood that Blackstone is sounding out potential buyers for the Connaught. The Mayfair hotel, restaurant and apartment block complex is in need of refurbishment, and Blackstone is not convinced it would recoup the investment that is needed. It is understood to have received a number of approaches and a bid of pounds 50m might secure the prestigious property.

Rival hoteliers have suggested that Blackstone might even think the unthinkable and sell Claridge's, one of the two true trophy assets in the Savoy portfolio. However, the hotel, a favoured haunt of peers, business leaders and ladies who lunch, has not yet been put on the market.

The attempt to sell off parts of the Savoy Group portfolio are sure to bring howls of protests from many of the people who objected to the Savoy being sold to Blackstone.

An adviser to the group suggested that Sir Hugh Wontner, the former chairman of Savoy who dominated the company for more than half a century, would be turning in his grave over the sale of the hotel company.

For years, Sir Hugh and his successors resisted attempts by Lord Forte, the father of Sir Rocco, to take over the hotel group and add it to his Trusthouse Forte chain. It was only after the Forte group was purchased by Granada that the stake it had built up in the Savoy was sold.

However, the decision to sell to Blackstone appears to have been extremely well judged. The London hotel market is now in a lull because of two separate developments - the building of a number of new hotels bringing new supply at the top end of the market and the disappearance of certain potential trophy buyers, such as the Sultan of Brunei, from the market.

The decision to break up the group comes after attempts by Blackstone to improve the profitability of the hotel group to justify the pounds 520m price tag, which equates to nearly pounds 1m per room.

Ramon Pajares, who retired as managing director of Savoy earlier this year, made a series of changes, including weeding out many of the old retainers who had been working for the company and offering them early retirement. He also attempted to attract more business customers.

However with the retirement of Mr Pajares, who has gone to run Hand Made Hotels, the new venture backed by Guy Hands, the arch investor from Nomura, Blackstone has change tack.

It has cut head-office costs and is running the group from New York, with the general managers largely autonomous, and has attempted to save money by revoking discounts given to former directors.