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Chinese investors may have short-term pullback in cross-border hotel investments after aggressive expansion last year

PUBLISHED : Tuesday, 02 February, 2016, 8:42pm
UPDATED : Thursday, 26 May, 2016, 3:28pm

Chinese investors - mainly insurers and large funds - may launch a short-term pullback in cross-border hotel investments given volatile conditions and a slowing mainland economy, according to an industry expert.

In 2015, Chinese capital is expected to represent some US$5 billion in global hotel investment,

making it among the top three exporters of capital globally along with the US and the Middle East, according to JLL’s Hotels & Hospitality Group .

This comes just years after China was not even in the top 10. The amount also accounted for nearly half of all cross-border investment out of the Asia region, the hotel consultant said.

Chinese insurance companies last year were active in hotel acquisitions such as the US$1.95 billion acquisition of the Waldorf Astoria New York.

While JLL expects to see a short-term pullback among the insurance companies and larger funds, it said wealthy family conglomerates will continue to show a strong appetite to invest outside the country. Chinese investors are also starting to pursue secondary markets, said JLL.

Looking ahead, mainland China outbound capital, and Asian capital as a whole are expected to target not only individual assets and portfolios but brands, platforms, operating companies - opportunities to gain scale and control cross border leisure and travel sectors.

In the overall global hotel sector, JLL expects 2016 to be another strong year but investors’ desire to buy is more measured now and volumes will be closer to 2014 levels than their 2015 outcomes.

“Our projection of US$70 billion would mark 2016 as the second-highest level of the cycle, and higher than what was initially forecast for 2015,” it said.

Hotel deal volumes rocketed 50 per cent to US$85 billion in 2015, boosted by a record proportion of cross-border capital and single asset transactions.

In all, 53 hotels sold for over US$600,000 per room last year, which reflects the high levels of confidence and capital in the hospitality sector.

“Activity in 2016 will be more measured, with fewer headline-grabbing ‘trophy’ properties on the market,”the report said.