Chinese companies are expanding their global real estate presence as they snap up blue chip properties in the U.S. and Europe
Chinese companies are expanding into the global hotel market with a raft of plans to buy or build luxury properties after a series of high-profile acquisitions.
Earlier this year, Anbang Insurance Group paid $1.95 billion for the iconic Waldorf Astoria Hotel in New York's swanky Manhattan, while the Sunshine Insurance Group snapped up the Baccart Hotel in the same upmarket district for $230 million.
Dalian Wanda Group Corp Ltd, the massive Chinese conglomerate, is another key player and has announced plans to open up to 10 major hotels in Europe and the United States in the next five years.
"Investment into overseas hotel properties by Chinese companies will be much more this year," Xia Yangyang, director of international capital at global property agents Jones Lang LaSalle in China, said. "And that investment will continue to grow in the future."
Statistics from a report released by Jones Lang LaSalle showed that Chinese companies last year pumped $16.5 billion into overseas real estate markets, with the hotel sector accounting for 6 percent.
Europe, Australia and the U.S. were the main destinations for investment, the report said. "One of the biggest trends of 2015 is the surge in Chinese investment into hotels globally. This is despite some underlying concerns across the globe, such as the Greek debt crisis and the recent fluctuations in the Chinese stock market," Mark Wynne Smith, who leads the global hotels and hospitality team at Jones Lang LaSalle, told traveldailymedia.com .
The latest Chinese company to enter the overseas hotel industry is Ctrip.com International Ltd. The country's largest online travel agency has launched Xieling, an Internet fund management platform, with Singapore-based F&H Fund Management and Huiyu Asset Management in China.
Ctrip and its partners hope to raise 2.5 billion yuan ($403 million) in the first phase with the fund being used for overseas hotel projects.
"About 90 percent will be raised among Chinese institutional investors with the company picking up the rest," a source close to Ctrip said.
"The investment focus will be on hotel projects in Europe, where many high quality properties are professionally managed but undervalued," he added.
A crucial reason behind Ctrip's project is the booming overseas tourism market.
Last year, the number of Chinese outbound tourists hit 114 million, according to the China Tourism Academy. In the first half of this year, the number reached 61.9 million, an increase of 16 percent compared to the same period in 2014.
"The outbound tourism market is part of the decision to set up the Xieling fund, but it is not the only reason," Dai Bin, head of the China Tourism Academy, said. "As an online travel agency, Ctrip intends to extend its brand through investing in overseas hotels."
This trend to go global was started by Chinese insurance companies looking for blue chip investments. At the start of the year, Anbang Insurance purchased a trophy asset in the Waldorf Astoria Hotel in New York from Hilton Worldwide Holdings Inc.
The deal was officially closed in February with the Hilton group staying in charge of the day-to-day operations.
"Hilton will operate the hotel, the linchpin of its portfolio, for the next 100 years," Christopher Nassetta, president and CEO of Hilton Worldwide, told the New York Daily News. "The 1,232-room landmark will also undergo an extensive renovation to ensure that Waldorf Astoria New York represents the brand's world-class standards for generations to come."
Anbang Insurance is likely to increase its presence in the hotel market as part of its asset portfolio by picking up properties in Europe and the U.S.. "Going forward, the company will increase its share of overseas assets especially in Europe and North America," Anbang said in a statement on its website.
Rival Sunshine Insurance Group, one of the seven largest insurance companies in China, has also moved into the sector. In February, it bought the new Baccart Hotel in New York, which opened a month later, and signed a long-term contract with the Starwood Capital's SH Group to run the property.
"New York remains the top choice in the U.S. for Chinese commercial real estate investments," Investors' Business Daily said on Investors.com last month.
"Of over $2 billion in U.S. assets bought by Chinese investors (so far this year), $1.64 billion was in Manhattan."
Apart from major insurance groups, property companies have also been targeting the overseas hotel industry.
Chongqing Kangde Industrial Group Co Ltd is an integrated corporation involved in real estate development, construction, hotels and property management.
In February, the Chongqing-based group purchased the Santiago Hotel in Tenerife, a Spanish island, for $66 million.
"This was part of our plan to buy overseas hotel properties," Lu Chaokang, chairman of the company, said. "It has always been our strategy to expand into the global market."
Dalian Wanda Group, the flagship of Chinese hotel brand developers, is doing just that. Last year, the company bought the Edificio Espana, a Madrid landmark in Spain, for $362 million from the Banco Santander. More overseas acquisitions are planned.
"In the next five years, the company aims to open between eight and 10 hotels in major overseas cities," Iija Poepper, sales and marketing vice-president of Wanda Hotels and Resorts, said.
By the end of last year, the group had already secured land to build hotels in London, Madrid, Los Angeles and Chicago. This is all part of Wanda's plan to expand worldwide in search of increased revenue and profit.
"It is easy for Chinese enterprises to get into the overseas hotel market," Zhao Huanyan, chief analyst at Huamei Consulting, a firm specializing in the hotel industry and based in Shenzhen, said.
"But in the long term, it will be important for Chinese companies, especially those in the hotel and tourism industries, to build up their own brands".
Key destinations will be mature markets such as New York, San Francisco, London and Singapore.
