Shimao, Starwood to Launch $200M China Hotel JV

Private equity superstar Barry Sternlicht’s Starwood Capital Group and Chinese developer Shimao Property Holdings are planning a $200 million China hotel joint venture, according to a conversation between Shimao executives and industry analysts this week.

Shimao will own a 51 percent stake and Starwood Capital will take 49 percent of the planned partnership, according to details revealed during a recent discussion with investment banks, although further financial details have yet to be disclosed.  In an earnings report on Thursday, Sai Tan Hui, Shimao’s vice chairman and group sales controller, said that the Hong Kong-listed developer had signed a strategic cooperation agreement with Starwood, in which “each of us will invest $100 million.”

“The joint venture will focus on maximizing the benefits that can be derived from the intangible assets,” said Tyrone Tang, General Manager of Shimao Hotels and Resorts, a subsidiary of Shimao Property Holdings said of the joint venture. “We believe that a combination of Shimao Hotels and Resorts’ strong management and comprehensive understanding of the Chinese hospitality industry, together with Starwood Capital Group’s financial strength and global lodging experience, will create win-win results.”

Shimao is already a major player in the mainland hotel industry, having developed Shanghai’s Hyatt on the Bund and the Royal Meridien Shanghai hotel, alongside a string of successful residential and mixed-use projects in China’s commercial capital.

Starwood Promotes, Shimao Manages

Just last year Starwood Capital Group exited its stake in its successful Starwood Hotels and Resorts group – the largest hotel company in the world, but only after a flirtation with China’s Anbang Insurance.

Now the hotel investment specialist hopes to capitalise on its experience and global hospitality knowledge by striking a mainland partnership with Shimao.

Shimao Hotels and Resorts, which operates 20 hotels with 6,500 rooms, will be concentrating mainly on management of the joint venture’s assets. In the previously mentioned earnings report, Lujiang Liao, Shimao COO and executive director, pointed out that, “we cooperate with [Starwood Capital] and set up a JV, which specializes in promoting our hotels. That is our boutique hotels. So we complement each other. Shimao does the management.”

Shimao’s hotel brands include MiniMax and MiniMax Premier, 3- and 4-star hotels aimed at millennials, as well as the Yu properties, the company’s high-end 5-star hotels that include the Yu Resort, Yuluxe Hotel, Yu Hotel and Yu Residence brands. Shimao has received wide acclaim for its plans to build the Shimao Wonderland Intercontinental, a five-star hotel built in an abandoned quarry which will include underwater rooms.

Hoping for that Chinese Middle Class Boom

“As one of the world’s fastest-growing economies, with a large and growing middle class with increasing disposable income, China represents an exciting market for us,” says Kevin Colket, managing director and head of hotels for Asia at Starwood Capital. According to official reports, China’s hotel industry brought in $145 billion in 2016 as the country’s middle class develops a taste for tourism.

In another mainland hotel deal, Beijing’s leading hotel firm BTG Hotel Group announced that it had completed integration with HomeInns Group in an attempt to vie for high-end hospitality market, becoming BTG HomeInns Group. BTG Hotel Group spent $1.6 billion taking over the popular HomeInn brand in 2016, one of the largest hotel chains in China.  The group now has 520 mid-priced and high-end hotels in China.