Chinese investors to include hotels in shopping list

Limited assets to see hospitality sector benefit from surge in outbound capital

PUBLISHED : Wednesday, 04 February, 2015, 6:00am
UPDATED : Wednesday, 04 February, 2015, 6:00am

A rising tide lifts all boats and the strong flow of Chinese capital is expected to increasingly spill over to hotel real estate assets this year, boosting transaction volume fivefold to US$5 billion.

Chinese buyers from the airline, tourism and insurance industries as well as mainland private equity firms were looking for quality assets in many places including the United States, Australia, South Korea, Europe and Russia, said Clinton Wu, an executive vice-president of JLL Hotel and Hospitality Group's overseas investment division.

JLL expects the flow of Chinese outbound capital into the hotel sector to total US$5 billion this year, up from US$1 billion last year.

That would place Chinese investors among the top ranks globally, alongside the US and Middle Eastern states.

Just a few years ago, China did not feature in the top 10 list.

"There's a lot of capital looking for limited assets," said Richard Kirke, CBRE's managing director for Asia-Pacific capital markets.

Kirke said Chinese outbound tourism numbers were increasing significantly across the globe, but particularly in Asia where the yuan was also strengthening relative to many currencies.

The other attraction was the immediacy of improvement in returns from increasing room rates, while competition was fierce in the office sector.

Major hotel transactions involving Chinese capital include the acquisition of Melbourne's Park Hyatt hotel by Fu Wah International Group and Anbang Insurance's purchase of Hilton's Waldorf-Astoria Hotel in New York.

Others include Sydney's Sheraton on the Park, acquired by Sunshine Insurance Group, and the Paris Marriott Hotel Champs-Elysees, acquired by Kai Yuan Holdings.

Wu said Chinese buyers were also looking at other ways to enter markets, such as the purchase of management companies.

"[Chinese firms] want to acquire hotel management companies as they do not have the expertise in running an international hotel chain," he said. "If they just acquire the assets but cannot run them correctly, [the assets] will not perform at the level they expect."

Mainland buyers could also further enhance the business by bringing the brand to the mainland, he said.

Shanghai Jin Jiang International Holdings bought Louvre Hotels, which represents a network of 1,100 mid-market properties in dozens of countries, from US investment group Starwood Capital last year.

HNA Group, the parent company of Chinese carrier Hainan Airlines, acquired an additional 8.3 per cent equity stake in Spanish hotel management company NH Hotel Group from Italian bank Intesa San Paolo in November last year.

More deals are expected to be announced this year.