Jinjiang Hotels woos investors before IPO

PUBLISHED : Thursday, 31 August, 2006, 12:00am
UPDATED : Thursday, 31 August, 2006, 12:00am

Jinjiang International Hotels Development, the mainland's largest hotel operator, is in talks with international hoteliers including Starwood Hotels & Resorts and Fairmont Hotels and Resorts over selling a strategic stake in the run-up to the company's US$300 million initial public offering, sources said.

Should the company invite an overseas chain as a strategic investor, the share offering could be pushed back to early next year, a person familiar with the situation said. Originally, a sale as early as the third quarter had been planned.

UBS and BNP Paribas are arranging the share sale.

Jinjiang Hotels, which manages about 250 four- and five-star hotels in Beijing, Shanghai and in Zhejiang and Jiangsu, runs Peace Hotel, a 100-year-old building on the Bund in Shanghai which with the Raffles Hotel in Singapore were Asia's most opulent hotels in the 1930s.

'[Overseas investors] will improve the quality of service at the hotels because the [mainland] operators still do not do five-star very well,' said Tung Tai Securities associate director Kenny Tang Sing-hing. 'If you want to improve the service and attract more different travellers, then you need them.'

Jinjiang Hotels, which saw a 13 per cent rise in net income to 98 million yuan in the first half on sales of 466 million yuan, also runs Jinjiang Inn, a chain of three-star hotels spread across 10 provinces.

Jinjiang Hotels plans to open 16 more hotels and inns by the end of 2008. It also operates a travel agency, fast-food outlets and a taxi-leasing service.

'For five-star hotels the outlook is good but in the three and four-star sector competition remains quite high now and will remain so because barriers to entry are low,' Mr Tang said.

US-based Starwood, which runs several hotel chains including the Luxury Collection, Sheraton, St Regis and Westin, operates 28 hotels in the mainland, Taiwan and Macau and has another 28 being built.

Fairmont of Canada, which does not have a presence in China, was bought this year by Saudi Arabia's Prince Alwaleed bin Talal and private equity firm Colony Capital. Colony owns the Raffles brand of hotels and operates one hotel in Beijing.

China attracted a record 120 million foreign tourists last year, ranking fourth among the world's most popular travel destinations. Foreign visitors spent US$29 billion in China while mainland travellers spent US$67 billion.