Warburg Pincus, VinaCapital Form $300M Hospitality JV Targeting Southeast Asia

From the beaches of Bali to the hills of Chiang Mai, there are a number of reasons to visit Southeast Asia on holiday. And with the region expected to see an uptick of visitors from China during the coming years, Warburg Pincus is betting that now is a good time to expand into the hospitality market.

The US private equity giant has kicked off what it describes as an aggressive expansion into the Southeast Asian hotel and resort market with an approximately $300 million joint venture with Vietnamese hospitality investor VinaCapital.

The new platform plans to acquire, reposition and enhance hotels in popular cities and develop luxury resorts in destinations across the region. In response to the highly fragmented nature of the Southeast Asian hospitality sector, the joint venture will look to acquire and build partnerships with prominent local hotel companies to enhance its management capabilities.

As part of the deal, the new company will initially take a 100 percent stake in Serenity Holding – a Vietnamese hotel management company previously owned by VinaCapital founder Don Lam – as well as in select resort and city hotels in Vietnam.

“We look forward to contributing our strong acquisition capabilities and local resources to build a hospitality platform of the highest quality and scale in the region,” Lam stated.

Founded in 2003, VinaCapital is one of Vietnam’s most prolific hospitality investors, having made 16 major equity investments over the past decade, totaling more than $220 million. The company currently has a portfolio of $1.4 billion in assets under management.

Warburg Pincus Wants To Take Advantage Of Chinese Tourism Boom

China currently represents the largest single source of visitors to Southeast Asia, representing over 12 percent of all international visitors. The World Travel & Tourism Council predicts the Southeast Asian tourism sector to grow by an average of 5.8 percent per year between 2016 and 2026 ranking it second globally in terms of long-term industry growth following South Asia.

The deal is motivated by a desire to capitalize on growing international, particularly Chinese, tourist arrivals to the region. With the number of Chinese outbound tourists expected to grow to more than 220 million during the next 10 years, Southeast Asia looks set to be the biggest beneficiary, with arrivals from China estimated to quadruple from around 10 million to 40 million during this time.

Warburg Pincus Adds Resorts to Asia Portfolio

The VinaCapital partnership is just the latest deal in what has been a hyperactive year for the US-based private equity firm in Asia. Earlier this month Warburg Pincus recently joined a consortium of investors in a bid to privatize Singapore-listed investment manager ARA Asset Management in a deal valuing the firm at $1.3 billion.

Earlier this year, Warburg Pincus-backed logistics developer e-Shang merged with APG-supported Redwood Group to form a logistics real estate platform spanning mainland China, Korea and Japan. The combined company was said to be targeting an initial public offering within one year’s time.

Shortly after that announcement, the alternative investment firm paid an undisclosed sum for a 40 percent stake in value-added real estate investment firm Kailong through its majority-owned subsidiary, D&J Industrial Property (China) Investment.