Lux­ury ho­tel deals

In­creas­ing out­bound tourism sug­gests pos­i­tive, sta­ble re­turns

China Daily (Latin America Weekly) - - Front Page - ByWANGWEN

Sta­ble in­vest­ment re­turns and out­bound tourism have prompted Chi­nese com­pa­nies to pur­chase more over­seas lux­ury prop­er­ties.

Sta­ble in­vest­ment re­turns and in­creas­ing Chi­nese out­bound tourism have prompted Chi­nese com­pa­nies to pur­chase more over­seas lux­ury prop­er­ties in re­cent years, some in­vest­ment ex­perts said.

Kai Yuan Hold­ings Ltd, a Hong Kong-listed in­vest­ment hold­ing com­pany fo­cus­ing on in­dus­trial in­vest­ments, an­nounced onMon­day that it would spend 344.512 mil­lion eu­ros ($471.94 mil­lion) on the property and oper­a­tion of Paris Mar­riott Ho­tel Champs-El­y­sees, the only five-star ho­tel lo­cated on the Champs-El­y­sees.

In mid-2013, Fo­sun In­ter­na­tional Ltd, an in­vest­ment group for in­sur­ance, in­dus­trial op­er­a­tions, in­vest­ment and as­set man­age­ment based in Shang­hai, also made a joint pro­posal with Ar­dian, a pri­vate eq­uity firm, to pur­chase 80 per­cent of the shares of Club Mediter­ra­nee SA, a global re­sort ho­tel group based in France, and the two pur­chasers al­ready had 20 per­cent shares of ClubMed.

The fast-grow­ing Chi­nese out­bound tourists group and their strong con­sump­tion power drew Chi­nese in­vestors to the over­seas ho­tel prop­er­ties, some an­a­lysts said.

“Travel is a driv­ing fac­tor for Chi­nese com­pa­nies pur­chas­ing ho­tel prop­er­ties in tourism des­ti­na­tions,” said Xia Yangyang, di­rec­tor of in­ter­na­tional cap­i­tal group at Jones Lang LaSalle China.

The num­ber of Chi­nese res­i­dents trav­el­ing over­seas in 2013 was 98.19 mil­lion per­son­trips, with an 18 per­cent yearon-year growth, and their con­sump­tion in­creased by 26.8 per­cent com­pared with 2012 to $128.7 bil­lion in 2013, the China Tourism Academy said in state­ment.

Chi­nese in­vestors also try to get a piece of pie from out­bound tourism mar­ket and their ho­tels will be at­trac­tive for Chi­nese trav­el­ers, as they could pro­vide more Chi­nese ser­vices, such as Man­darin ser­vices and Chi­nese food, Xia said.

Kai Yuan Hold­ings said in its an­nounce­ment that once the ac­qui­si­tion is com­pleted, more mar­ket­ing ef­forts would be fo­cused on the China mar­ket. “The group be­lieves there is po­ten­tial to at­tract more Chi­nese cus­tomers and fur­ther im­prove the cur­rent oc­cu­pancy rate of the ho­tel,” Kai Yuan Hold­ings said.

Some smaller pri­vate­ly­owned com­pa­nies also in­vested huge amounts into the over­seas ho­tel prop­er­ties.

Jiangsu GPRO Group Co Ltd, a pri­vately owned com­pany in­volved in man­u­fac­tur­ing, real es­tate and mod­ern ser­vices in­dus­tries based in Jiangsu prov­ince, made the largest in­vest­ment by a Chi­nese com­pany in Spain this March by pur­chas­ing a fives­tar ho­tel for 50 mil­lion eu­ros.

Sichuan Xingl­ida Group In­dus­try Co Ltd, a pri­vate­ly­owned real es­tate in­vest­ment com­pany based in Sichuan prov­ince, spent $47 mil­lion on aMar­riott ho­tel in­Los Angeles in late 2013.

Ac­tu­ally, the ten­dency of Chi­nese com­pa­nies go­ing over­seas started from 2012, when they started to di­ver­sify their busi­ness and made hedges through over­seas in­vest­ment.

“Real es­tate is the main in­dus­try for Chi­nese com­pa­nies to in­vest into ho­tel property is just a type of real es­tates,” said Xia from LaSalle.

The gate­way cities, such as Paris, Lon­don, New York and Los Angeles, are still the first op­tions for the Chi­nese in­vestors, Xia said, which have strong mar­kets.

The real es­tate mar­ket, in­clud­ing ho­tel property mar­ket, in the main cities of Europe and theUS will con­tinue go­ing up, as the econ­omy there is re­cov­er­ing, he said.

Com­pared with other types of real es­tate, ho­tel prop­er­ties can pro­vide more sta­ble re­turns, if they are well man­aged. Most of the ho­tel prop­er­ties Chi­nese in­vestors pur­chased still have man­age­ment con­tracts with in­ter­na­tional ho­tel man­age­ment com­pa­nies and there is lit­tle man­age­ment risk, Xia said.

The man­age­ment con­tract be­tween Paris Mar­riott Ho­tel Champs-El­y­sees and Mar­riott Group will be con­tinue un­til 2030 and af­ter this pe­riod, the con­tract will be re­newed au­to­mat­i­cally for three times with 10 years each time, ac­cord­ing to the an­nounce­ment of Kai YuanHold­ings.

The ho­tel lo­cated in the cen­tral of Paris has an oc­cu­pancy rate of over 88 per­cent over the past three years, “which will pro­vide a sta­ble rev­enue stream to the group”, Kai Yuan Hold­ings said.

Mean­while, some Chi­nese com­pa­nies have tried to build up their own brands through ac­qui­si­tions of over­seas ho­tel prop­er­ties. Dalian Wanda Group, the com­pany of the rich­est man in China, will es­tab­lish 10 ho­tels in over­seas mar­kets in the next eight to 10 years.

Cities like New York, Paris, Moscow and New Delhi may be Wanda’s des­ti­na­tions and the group has al­ready in­vested 700 mil­lion pounds into a new ho­tel in Lon­don, said Ilja Poep­per, vice-pres­i­dent of sales and mar­ket­ing ofWanda Ho­tels & Re­sorts.

Dif­fer­ent from other Chi­nese in­vestors, Wanda is build­ing up its own man­age­ment team and its am­bi­tion is to be the world’s largest lux­ury ho­tel owner and op­er­a­tor by 2020.

There is much de­vel­op­ment room for Chi­nese owned ho­tel brands for his­tor­i­cal rea­sons, and the ris­ing out­bound trav­el­ers will pro­mote more Chi­nese brands over­seas, said Daniel Voellm, man­ag­ing di­rec­tor of the Hong Kong branch of HVS Global Hos­pi­tal­ity Ser­vices, a hos­pi­tal­ity in­dus­try con­sult­ing firm based in NewYork.

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