LONDON—While many investors are avoiding the recession-hit eurozone, Qatar certainly isn't one of them.
The tiny country is a favorite to acquire a 42 U.K.-based portfolio of Marriott hotels in a deal worth up to approximately $1.1 billion. The Sunday Times claimed the Qatar Investment Authority is the highest bidder, although its Gulf rival Abu Dhabi also is in contention. QIA is an investment company founded by Qatar in 2005 with the goal of strengthening the country’s economy by diversifying its assets. A decision about the hotels, which used to be owned by Whitbread, will be made in the next few weeks.
Up until recently, few people outside of the Middle East would have known anything about the peninsula, which at 4,416 square miles is smaller than the U.S. state of Connecticut. But after a spending spree in Europe, funded through the country's gas and oil reserves, it is difficult to avoid Qatar’s money and influence.
Aside from the hospitality industry, Qatar Holding, a global investment house founded by the QIA, has major stakes in football teams across Europe, in mining giant Xstrata, in luxury goods group LVMH, and in oil companies Royal Dutch Shell and Total. The country also owns 95% of Europe's new tallest skyscraper, the Shard in London.
A representative from Qatar Holding could not be reached for comment despite several attempts.
The sheer scale of Qatar's purchases is a demonstration of the country's rapidly growing global visibility and influence, analysts said.
“Having made acquisitions such as this, it seems to me that Qatar’s profile on the world stage will have been elevated,” said Russell Kett, HVS London chairman.
This year alone, Qatar's hotel owner and developer Katara Hospitality has bought two flagship Raffles hotels in Singapore and Paris and also is set to buy four luxury hotels in France from Starwood Capital for $940 million. While Qatar Holding will own the hotels, it will ask U.S. hotel group Hyatt to manage them, according to the French newspaper Le Figaro.
Katara Hospitality also is redeveloping the Excelsior Hotel Gallia in Milan and the Hotel Schweizerhof in Zurich.
“Adding these iconic properties to our portfolio represents consistent steps of (Katara Hospitality’s) strategic expansion at the international level,” said Hamad Abdulla Al Mulla, the company’s CEO. The company is aiming to more than double its portfolio from 24 properties to 60 by 2030.
|Katara Hospitality’s Peninsula Paris hotel is slated to open during 2013.
Long term and low risk
One analyst believes these recent acquisitions show that Qatar’s investment strategy is focused on pursuing long-term, low-risk strategic investments in safe and stable locations.
“Qatar has identified an opportunity to obtain assets in a favorable environment where asset owners are looking to offload their properties at a time where most of Europe is continuing to struggle with high debt,” said Christopher Hewett, consultant at TRI Hospitality Consulting. “This is particularly the case with the 42 Marriott hotels in the United Kingdom. These hotels are owned by Whitbread, which is currently undergoing a debt restructuring, of which the sale of these assets is a major part of the process.”
Separately this month, Qatar Holding announced its intentions to diversify Harrods, the London luxury department store that it acquired in 2010, into a global luxury brand.
“The target plan is to open Harrods hotels in key cities such as Kuala Lumpur, Malaysia, New York and Paris as well as in China,” a spokesman from Qatar Holding said. “Preference will be given to construction sites already owned by Qatar Holding or its affiliates, for example at Chelsea Barracks in London or Costa Smeralda in Sardinia. Qatar Holding ultimately intends to grow Harrods into a global enterprise that defines the luxury retail and leisure sectors."
Qatar Holding’s plans are a sensible way to make money from the Harrods name, Kett said.
“The Harrods retail brand is arguably one of the most iconic in the world, and there is a limit as to how many stores Qatar could have around the world. Therefore it makes sense to consider ways in which the brand can be attached to other luxury, high-end experiences of which hotels makes complete sense.”
One analyst in Qatar, who doesn't wish to be named, believes that the country invests in global businesses, which it then brings to the domestic market. It could be that those recent acquisitions will be set up in Qatar’s capital city of Doha sometime soon. Given that Qatar is hosting the Soccer World Cup in 2022, and critics are pessimistic about how a country the size of Qatar will be able to handle an influx of approximately 400,000 fans; the arrival of new hotel brands would be welcome.
The luxury brand of Harrods, as well as other recent acquisitions might also make their way to Qatar itself, analysts said. The country has approximately 50,000 hotel rooms but is aiming to increase that to 95,000 by the time of the 2022 World Cup.
“There is an opportunity to leverage these brands for the Qatar market,” Hewett said.