The state of hotel asset management in China
01 JULY 2015 8:15 AM
With growing interest among hotel owners and developers, hotel asset management is set to increase its importance in the Chinese hotel industry.
Although the hotel asset management discipline has reached a level of prominence in the United States, it remains in its infancy in China. As the Chinese middle class expands, domestic travel continues to increase, supporting growth of hotel supply nationwide. Many Chinese hotel owners are beginning to recognize the values of property-level operations and asset management, distinctly separate functions that need to work in tandem for a truly successful hotel.
While many American hotel owners use third-party operators to properly and successfully manage their properties, Chinese hotel owners and/or developers have typically engaged brand management for their hotels and would appoint a representative from within the owner’s firm to communicate with the brand management company. Initially, this model was successful in China due to strong demand for internationally flagged hotels. Most Chinese hotel owners are only starting to consider the option of franchise agreements, particularly those with their mid- and lower-tier brands.
Only a few Chinese hotel ownership companies presently have an asset management department, although more groups are becoming aware of the importance of asset management. Professional, third-party asset managers also are increasing slowly but surely.
Hotel asset management is predominantly focused on improving the value of existing hotels; however, the asset management discipline also contributes to other phases of the hotel investment lifecycle. A reliable hotel asset management function has become more important than ever for Chinese investors who have made significant international hotel investments in recent years. These investments include:
- $2 billion for Waldorf-Astoria New York by Beijing-based Anbang Insurance Group Company;
- Shanghai Jin Jiang International’s purchase of Louvre Hotels Group;
- Hong Kong-based Kai Yuan Holdings’ acquisition of the Paris Marriott Hotel Champs-Elysees;
- China’s Fu Wah International Group buying the Park Hyatt in Melbourne;
- Hainan Airlines’ purchase of an additional 8.3% interest in Spain’s NH Hotel Group raising its stake to 29.16 million shares to become the NH’s largest single shareholder; and
- Chinese conglomerate Fosun’s 18-month quest to buy French holiday resorts group, Club Med.
These acquisitions of landmark hotels or hotel companies by Chinese companies signal the increasing influence of Chinese investors and optimism among these investors regarding the strength of the global hotel market. These investment decisions are influenced by the significant amount of investment capital available to Chinese and the belief that the hotel business is going to grow globally and be healthy, driven by the increasing influx of the more than 100 million annual Chinese travelers.
Chinese hotel owners and developers eagerly are pursuing hotel asset management expertise given significant growth in the domestic hotel market and international hotel investments. With the growing interest among hotel owners and developers, hotel asset management will surely increase its importance in the Chinese hotel industry.
Tao currently serves as CEO of Luneng Group Hotel Management Company. Tao oversees both operation and asset management for all Luneng Group’s hotel assets including its fast growing pipeline in China. Within a few years, Luneng’s hotel portfolio will have over forty assets. Some of them will remain self-operated while the rest are managed by Hilton, IHG, Marriott, Ritz Carlton, Four Seasons and other international brands.
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