Trends show reversal of Chinese investment in Western hotels


The hospitality industry is a global business and investors around the world have capital to invest in international companies or well-known hotel portfolios.

Over the past decade, Chinese companies have been among the biggest players looking to invest in global hotel brands and real estate in America’s largest urban markets. In December 2016, Hotel News Now published a detailed timeline of Chinese capital outflows in the hospitality industry, which seemed to be changing rapidly.

But since then, the direction of Chinese capital and hotel ownership has reversed.

Russia’s invasion of Ukraine and global geopolitical tensions have only made cross-border investment more uncertain. CNBC reported Friday that Chinese companies could be delisted from US stock exchanges due to lack of financial transparency.

“The U.S. Securities and Exchange Commission recently named five U.S.-listed U.S.-listed certificates of deposit of Chinese companies that it says have not adhered to the Foreign Corporate Liability Act. ADRs represent shares of non-U.S. companies and are traded on U.S. stock exchanges,” according to the CNBC report. “Chinese ADRs flagged by the SEC are the first to be identified as non-compliant with HFCAA standards. United is unable to review company audits for three consecutive years.”

In recent years, Chinese companies active in acquiring Western hotels have reduced their investments. Some have disappeared or shrunk – including insurance company Anbang Insurance Group and tour operator HNA Group – as the Chinese government has spoken out against what it sees as overspending in non-essential markets. Some of the Chinese companies buying these assets and hotel companies have been acquired by other Chinese companies – like when Jin Jiang International Holdings acquired Radisson Hotels Group from HNA in 2018 – potentially at the insistence of the Chinese government.

This does not mean that Chinese capital is not yet present in the West. For example, Jin Jiang owns 13% of the French company Accor and Huazhu Hotels Group owns the German company Deutsche Hospitality.

Chinese companies are believed to only allocate capital into international hotel ventures with the approval of the Chinese state government, and when the Chinese authorities consider such outflows not to be part of the “essential” strategy of the hotel. a Chinese company, they may be forced to sell their investments. .

Here’s a look at how the property sweep in the Western accommodations industry has slowed to a more stable level and how some companies have fallen out of favor.

It was in 2018 that things turned around for Chinese companies in the West. Very quickly, firms that were titans in the West quickly became minnows or were even expelled from the industry.

Two such titans were Anbang Insurance Group and HNA Group, which have been making headlines in the global hospitality industry in recent years. Anbang Insurance Group almost bought Starwood Hotels & Resorts Worldwide pulled out from under Marriott International in 2016, a few years later buy the Waldorf Astoria New York for $2 billion.

The first domino to fall was when the The Chinese government seized the assets and operations of Anbang Insurance Group in February 2018. In what has been called a “Chinese regulatory crackdown”, the state-controlled China Insurance Regulatory Commission took control of all of the group’s assets, including the Waldorf Astoria New York . The Chinese government also planned to prosecute Anbang Chairman Wu Xiaohui, who was arrested in June 2017.

In September 2021, Goldman Sachs and Bank of America announced that they finance a portfolio of nine luxury hotels in the United States — a portfolio that was part of the Strategic Hotels & Resorts real estate investment trust — formerly owned by Anbang, CoStar News’ Mark Heschmeyer reported. The Chinese government has valued the hotels at $2.82 billion.

Another Chinese investment titan, HNA Group, has diversified by deploying capital in three hotel companies outside China. HNA acquired Carlson Hotels in 2016, and for a time owned 20% of NH Hotels and 25% of Hilton, respectively. HNA also owned, then sold, 25% of the shares of two Hilton spin-off companies during this period: timeshare company Hilton Grand Vacations and REIT Park Hotels & Resorts.

In July 2018, the co-founder and president of HNA Wang Jian died in Bonnieux, France, falling from a wall he had climbed on for a photo shoot and hitting rocks below. According to Reuters, French newspapers later dismissed reports that foul play was suspected in the death.

HNA previously owned Radisson Hotels Groups, whose hotels in China include the Radisson Tianjin Aqua Park in the city of Tianjin, southeast of Beijing. (Radisson Hotels Group)

A month later, HNA sold Radisson Holdings to Chinese peers company Shanghai Jin Jiang International Hotels Group. The Jin Jiang deal was for 100% of Radisson Holdings and 51.5% of the outstanding shares of Radisson Hospitality AB for a total of approximately 3 billion Swedish krona ($332 million). The new owners also acquired an 18.5% stake in Radisson Hospitality.

The month before the sale to Jin Jiang, Eric De Neef, Radisson Group Executive Vice President and Chief Commercial Officer, said in an interview that Radisson had “key money for our 2022 plans. We don’t necessarily need HNAs, but we need owners. Will HNA stay? This is the question that could be asked in the market.

HNA had owned the European hotel chain for just over two years.

In February 2020, the government of the Chinese province of Hainan took control of HNA. Financial website S&P Global said a government task force did so “to take control of HNA’s board and help the company devise a plan to overcome its liquidity issues.”

HNA Group is now majority owned by Chinese government entity Hainan Traffic Administration Holding. In January 2021, HNA Group was declared to be in sale mode after a few of its creditors have filed a lawsuit asking for the liquidation and reorganization of the Chinese company. In April, Financial Worldwide announced that HNA had been placed into administration in April, saying it had spent approximately $49 billion in assets, many of them in the travel and tourism sector between 2015 and 2017. HNA’s assets included Hainan Airlines, which in the first nine months of 2020 reportedly lost 15.6 billion yuan ($2.43 billion), largely due to the COVID-19 pandemic.

In September 2021, HNA Chairman Chen Feng and CEO Tan Xiangdong were “detained for alleged crimes» and « placed under compulsory measures », nine months after the placement of the company in receivership. Chinese authorities have announced a reorganization plan to split HNA into four new business units and “eliminate the company’s existing shareholders, including the former management team.”

Regarding the future of HNA, officials from Hainan Traffic Administration Holding said that “if the company successfully emerged from bankruptcy, it would operate as four independent units focusing on aviation, airport operations, finance and trade”.

Other Chinese companies that have invested internationally in hotel businesses have faced challenges. In 2018, CoStar News reported on the state of Chinese investment in hospitality despite fears of rising Chinese debt and a lack of transparency and accountability.

The article focused on Fosun, which owned companies such as Thomas Cook, the oldest hotel company in the world. In July 2019, Fosun injected £750 million ($941.3 million) to shore up the package tour business.

Less than three months later, Thomas Cook was no more, declare bankruptcy and stranding around 15,000 holidaymakers, mostly travelers from the UK. The New York Times reported that Thomas Cook was £1.7 billion in debt.

Another Chinese company, Wanda Hotel Development, has sold 90% of the 101-story Wanda Vista tower in Chicago in July 2020, reported CoStar News. The property later changed its name to St. Regis Chicago in part because owners of residences also in the building feared the Wanda part of the name would reduce resale value.

“The proceeds from the sale will pay off $244.8 million in debt Wanda owes on the project, according to a company statement. Wanda had total debt of approximately $2.9 billion at the end of March. “, although not all of this debt is owed to the hospitality industry, CoStar News reported.

Jin Jiang, through his ownership of Louvre Hotels, owns the majority of India’s Sarovar Hotels, whose assets include the Gokulam Park Hotel & Conference Center in Kochi, formerly known as Cochin. (Sarovar Hotels)

Some Chinese companies have invested in Western hotel companies and have prospered. Among them, Jin Jiang, owner of the French hotel company Louvre Hotels Group, acquired Radisson from HNA and holds a stake in Accor.

Jin Jiang’s support enabled the Louvre to acquire a majority stake of 74% in Hotels in Sarovar India in January 2017 for $50 million. While the majority stake in Sarovar is in the name of the Louvre, the Louvre has been wholly owned by Chinese company Shanghai Jin Jiang International Hotels Group since late 2014.

In December, Jin Jiang increased his stake in Accor to 13%, making Jin Jiang the largest third-party owner in the French hotel industry. Another Chinese company, Huazhu Hotels Group, currently owns 4.7% of Accor.

Speaking of Huazhu, the company agreed to buy a German hotel company German Hospitalityformerly Steigenberger Hotels & Resorts, for €700 million ($764 million) in November 2019. The deal closed in January 2020.

Today, Huazhu has more than 5,000 hotels in 400 cities.

One area where the Chinese government has cracked down severely is the gaming segment in China, which is confined to Macao, the former Portuguese colony.

Gambling is illegal in other parts of China, and the Chinese government has accused several executives of the Macau hotel-casino companies to use their businesses to launder money and finance the expenses of high rollers at the gaming tables.

Many high profile arrests have been done.

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