I recently had a conversation with someone who knew the hotel well when it opened and he shares your views of the hotel then.

It apparently belonged to one of the Sultan's relatives at opening. Then the Sultan and this relative had a falling out. The hotel could have been collateral damage.

The Sultan himself is no stranger to hotels - he owns the Dorchester Hotel group. They could try to bring the Empire up to standards by simply transferring it to them - but apparently the "poilitics" are not there.