China’s appetite for international travel is further encouraging investors to seek out luxury hotel assets in major cities.
The Paris Marriott Hotel Champs Elysees is the latest landmark hotel to switch to Chinese ownership following a US $467.27 million deal, which transfers ownership of the iconic property to Hong Kong-based investor Kai Yuan Holdings.
China is the world’s fastest growing travel market. In 2013, 98.19 million Chinese tourists ventured overseas – up 18 per cent on the previous year*. As their wanderlust grows investors are following suit, ploughing capital into cities and properties that cater to increasing demand from Chinese nationals.
“Chinese investors are focusing on cities with an existing Chinese community and a demand from Chinese tourists,” said Scott Hetherington, CEO, Hotels and Hospitality Group, JLL.
“In doing so they are able to take their investment full circle and support the overall profitability of these assets; by employing Chinese staff and catering to the needs of Chinese customers, who are travelling to these destinations in large numbers.”
London, Paris, New York, LA, San Francisco, Vancouver and Sydney and Hong Kong are examples of the gateway cities profiting from Chinese travellers’ thirst for global travel, says Hetherington.
“Numerous cities in Europe, the USA and Asia Pacific benefit from direct air travel links from mainland China,” he adds. “These cities already have a strong Chinese influence and this makes them more attractive to tourists and investors alike.”
The closure of the Paris Marriott deal follows the sale of the Waldorf Astoria in New York, which hit the headlines last week after it was bought by Chinese insurer, Anbang, for US$1.9 billion.
Across Asia Pacific alone Chinese buying activity grew by 30 per cent in the first half of 2014, according to new JLL figures. This is set to continue into 2015, says Nihat Ercan, Executive Vice President, JLL Hotels and Hospitality Group.
“Investors from within Asia have, for many years, focused on acquiring core assets across all sectors, including hotels outside of the region most notably in the Australia, the UK and USA. And this is still the case,” he says.
“However, we are seeing first time acquisitions of hotels by an increasing number of Chinese mainland investors. For many it’s a first foray into investing in the luxury segment outside of China.”
“There’s an emotional appeal to investing in hotels,” he adds. “These investors have become familiar with the asset class having invested in mixed use developments with a hotel component in China, and they’re now seeking out quality hotel assets.”
Chinese demand for luxury hotels will increase further following the recent relaxation in outbound investment rules from China’s Ministry of Commerce.
“The recent relaxation in investment parameters from China’s MOC will only strengthen this demand for high quality hotel investment opportunities,” adds Hetherington.
While prize investment opportunities such as the Waldorf Astoria and the Paris Marriott hotel remain few and far between, investors are exploring other markets.
“We’re expecting to see magnificent activity in markets such as Australia, particularly in the key cities such as Sydney.”