Chinese will boost global acquisitions to 10%: Savills

Real estate advisor Savills predicts Chinese investors will increase their share of global cross border hotel acquisitions from the current level of 4% to 10% by 2017. The firm believes that the Asia Pacific regions and the UK, namely London, are set to benefit the most from this growing investment in line with the expansion of overseas Chinese tourism.

According to statistics from Real Capital Analytics (RCA), Chinese investors have spent approximately £1.6 billion (US$2.6 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 to capitalize on the growth in Chinese visitors.

“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,” said Giles Furze, associate director of hotel valuation at Savills. “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.”

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 (US$734 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 (US$326 million).

Savills bulletin also states that the proposed streamlining of visa regulations for Chinese visitors to the UK could boost visitor numbers with VisitBritain 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. However, the firm believes that as Chinese travellers become increasingly more sophisticated and in turn their reliance on tour group travel diminishes, the popularity of budget and mid market hotels in core locations will rise, in particular amongst those international brands that are already established in mainland China such as IHG, Accor and Starwood.

“The faster growth in independent Chinese travellers to the UK means that location and reputation will become increasingly more important when selecting accommodation providing opportunities for Chinese operators to enter the UK market,” said Marie Hickey, associate director of research at Savills. “However, we suspect that this is unlikely to be on a large scale. While there will be operators, particularly in the upscale sectors, that will make the leap into UK and European markets, for the Chinese budget and midmarket brands the initial focus is likely to be on the wider Asia Pacific region.”