The Reid family sold their interest in the hotel in 1925 to an English company, Reid's Palace Hotel Ltd which, in turn, was dissolved in 1937 when Island Hotels (Madeira) Ltd was formed.

Shortly after acquiring the hotel, Island Hotels increased its capacity by constructing the East wing. Later, in 1966-67, the Garden Wing was built. The hotel was refurbished and modernised in 1972-73 and again in 1990, when several luxury suites were added. At the time, just prior to Reid's centenary, the dining room was redecorated in its original classic style, while the Cocktail Bar and terrace along with the Grill Room restaurant were completely rebuilt and refurbished.

In July, 1996, Reid's was taken over by Orient-Express Hotels Inc. and reverted to its original name, Reid's Palace.