Chinese to Account for 10% of Global Hotel M&A by 2017

A market analysis report released this month by international real estate advisor Savills, predicts that Chinese investors will increase their share of global cross border hotel acquisitions from the current level of 4% to 10% by 2017.

The report predicts that the Asia Pacific region and the UK, particularly London, will be the primary beneficiaries of this investment trend, which it finds to be driven in large part by the expansion of Chinese overseas tourism.

Last year Chinese developer Dalian Wanda acquired the US$1.1 billion One Nine Elms project in London, which is planned to include a five-star hotel. In December, Wanda’s Shanghai-based rival, Greenland Group agreed to acquire two US$900 million properties in London.

China Acquires $2.67B in Real Estate Over Five Years

According to statistics from Real Capital Analytics (RCA), Chinese investors have spent approximately £1.6 billion (US$2.67 billion) outside of their domestic market over the last five years. Savills predicts there may be further Chinese investment in the form of corporate acquisition as it represents an attractive channel into the UK and European markets.

Direct investment into individual hotel assets will increase as the momentum of wider real estate and infrastructure investment continues into the UK and is supported by visitor growth. The firm also states that it has seen a growing number of Hong Kong and Chinese Hotel groups looking to establish their own brands in the UK in order to capitalise on the growth in Chinese visitors.

Giles Furze, associate director of hotel valuation at Savills, commented: “An increase in Hong Kong and Chinese brands would be an exciting development for the UK market but in the short term we do expect this to be relatively limited due to current levels of Chinese visitors. Major international operating groups will instead continue to develop sub brands suitable for local markets, and will benefit from cross-border group awareness and loyalty.”

18 Hotel Projects in Five Years

Savills reports that Hong Kong and mainland Chinese purchasers have acquired approximately 18 hotels and hotel development sites in the UK over the last five years spending close to £450 million. The firm estimates that over the next three years activity by this group could more than double with annual average volumes in excess of £200 million.

The real estate firm’s analysis also finds that the proposed streamlining of visa regulations for Chinese visitors to the UK could boost visitor numbers with VisitBritiain, stating that by 2020 Chinese visitors to the UK could reach 650,000 per year. This growth in numbers would initially benefit large budget hotels in the city fringe locations which are most popular with tour groups.