Hotel investment fund targets Chinese outbound travellers

Hong Kong private equity firm First Eastern Investment and Gloria Hotels and Resorts, a subsidiary of state-owned food giant Cofco, have set up a fund to raise US$100 million to invest in overseas hotels catering to Chinese tourists.

"Chinese outbound travel has reached a critical mass to warrant an international hotel brand with Chinese characteristics," said Victor Chu, the chairman of First Eastern, which also owns a third of Japanese budget carrier Peach Aviation.

The fund, with the two anchor investors providing 10 per cent of the seed money, will acquire or make equity investments in 10 to 20 hotels in cities outside the key centres in countries popular with Chinese tourists, Chu said. The partners plan to have the entity go public as a hotel company through an initial public offering in London in five years, he said.

"There is no mid-market hotel with Chinese characteristics catering to the needs of Chinese travellers. There is Shangri-La, with Asian characteristics, but that is more high-end," Chu said. "We want to be the first mover to cater for the massive scale of Chinese outbound tourists and offer them what they are looking for when they travel abroad - which is Chinese concierge and Chinese menus," he said.

Chu likened the proposed model to the way the Nikko hotel brand caters to Japanese.

Increased disposable income in China's growing middle class - accounting for two-thirds of its urban population - has accompanied a rapid rise in international travel, with many going abroad for the first time.