(FORTUNE Magazine) – Japanese moguls made a big splash in the Eighties by buying trophy hotels at trophy prices. Now, oil-rich potentates are back in the game, scooping up these jewels at a discount just as the business is turning around. Says consultant Bjorn Hanson of Coopers & Lybrand: "The Arabs are hitting two home runs. They will have no new competitors since the economy still precludes luxury construction, plus they can increase rates because hotel occupancies are way up."

Among the bargain hunters: the Sultan of Brunei and his brother Prince Jefri--the latter recently bought the lavish Bel-Air hotel for $60 million. That's about half what Japan's Sazale Group paid for it in 1989. He also grabbed jailbird Leona Helmsley's former namesake inn, now the New York Palace, for a tidy $202 million--a steal, according to some industry analysts.

The Sultan, who's worth some $37 billion--he reportedly once left a $170,000 tip--can pay retail, as he did for the prestigious Beverly Hills Hotel. But even at $182 million he didn't overpay. Says Thomas Parrington, president of the management firm Interstate Hotel: "Brunei's royal family expects a decent return."

Also on a buying binge is Prince Alwaleed bin Talal, nephew of Saudi Arabia's King Fahd. He recently teamed with Singapore's CDL Hotels to take New York's famed Plaza Hotel off Donald Trump's hands (it was half owned by the banks) in a complicated deal that values the property at $325 million. Prince Walid, as he is known, favors underperforming, brand-name companies. For instance, he has quadrupled his 1991 investment in a strapped Citicorp. Last year he bought 50% of Fairmont Hotels, 25% of Four Seasons Hotels, and 24% of EuroDisney, all name-rich and cash-poor.

Meanwhile, Japanese banks still have plenty of high-cost inventory to unload. But they are being offered less than 50% of construction cost. Middle Easterners bought only a few of these properties; they are unwilling to be passive owners. "The Arabs are generally interested in hotels unencumbered by management agreements," says Hanson. The Japanese signed long-term contracts that gave management companies anywhere from 7% to 12% of revenue. Adds a source close to Prince Walid: "He doesn't believe in the separation of ownership and management; he wants to be involved in both."

- Faye Rice