China’s Hotel Binge: Dealmakers and Travelers Are Coming

This year, the hotel industry has had its sights set on China and, more specifically, its purchasing power. We all watched and waited as Marriott International all but acquired Starwood Hotels & Resorts Worldwide when Anbang Insurance Group, a young, Beijing-based holding company whose subsidiaries primarily deal with insurance, banking and financial services, stepped in to bid for the 11-brand hotel company. And we all reported on the outcome: The insurer withdrew a $14-billion bid. But not only did Anbang make a play to pay on this deal, it also made a move for Strategic Hotels & Resorts, acquiring the company for $6.5 billion from Blackstone. The Chinese company has been on a spending spree, aiming to acquire foreign assets with a notable push in the lodging space, though Chinese investors have been active in the real estate market in general in recent years, and certainly in New York City. Let’s not forget Anbang’s purchase of New York’s iconic hotel, the Waldorf Astoria, for nearly $2 billion, reported as the largest-ever sale of a U.S. hotel and the largest U.S. real estate purchase by a Chinese buyer.

There’s a growing trend of Chinese investors making a grab for U.S. real estate, which is turning a few heads, if not raising a few eyebrows. Now, as this issue goes to the printer, Beijing-based HNA Group will acquire an approximate 25% equity interest in Hilton Worldwide Holdings Inc. from affiliates of Blackstone, establishing a long-term strategic investment in Hilton and Hilton’s planned spin-offs of Park Hotels & Resorts and Hilton Grand Vacations. The transaction, expected to close in Q1 2017 and valued at roughly $6.5 billion, reduces Blackstone’s interest in Hilton to about 21%. Following the close of Hilton’s spin-offs, HNA will own approximately 25% of all three companies. The deal also allows HNA to appoint two directors to Hilton’s board of directors. Earlier this year, HNA became the sole owner of Carlson Hotels, including its roughly 51.3% majority stake in Rezidor Hotel Group. So wait, isn’t there a conflict of interest here?

Yes, Chinese buyers have been active in overseas deals this year with billions of dollars invested in foreign takeovers—and hotels have been a focus of those deals. But it’s not just the investors who have purchasing power and interest in the U.S. It’s Chinese travelers, as our cover story reports. And they are coming with lots of money to spend. In the story, which starts on page 32, Senior Associate Editor Nicole Carlino writes about not only attracting this growing market, but catering to these guests and, consequently, retaining them through technology, social media, apps and guest services.

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