Asia's taste for European hotel assets still hardy in face of Chinese government tamp down

JLL's global transactions report for Q1 found that volumes in EMEA had fallen 20 percent "as investors take a conservative approach due to the heavy election year." 

Looking ahead, the company said that controls on outbound investment in China would limit the activity of the country’s investors, comments made as Singapore’s First Sponsor acquired Dutch hotel group Queens Bilderberg.

“China continues to be the largest exporter of outbound hotel capital, and has quickly become a key source of international capital with an increasing investment allocation into the sector," JLL said. “Looking forward, we may not see a repeat of recent big-ticket transactions due to tighter capital controls imposed by the government; however, hotels will definitely continue to attract a larger share of Chinese outbound investment due to their desire for higher yields and vertically integrated approach to travel and tourism.”

Chinese investments in the EU rose 77 percent to over €35 billion in 2016, with Germany accounting for €11 billion or 31 percent of total Chinese investment in Europe, according to the study by MERICS and Rhodium.

Tightening Up

That looks likely to fall this year, after the Chinese government implemented measures to restrict outbound investments in the face of accelerating capital outflows. They included banning overseas investments of more than $10 billion, stopping mergers and acquisitions worth more than $1 billion that were outside a Chinese investor’s core business and halting foreign real estate deals by state firms involving more than $1 billion.

Deals which have been affected include HNA’s ongoing moves to acquire the remaining shares in Rezidor Hotel Group that it did not acquire when it bought Carlson Hotels.

“There are still restrictions placed on Chinese investors by the government and these will be in place for the rest of the year, but for those who managed to put their money in Hong Kong and Singapore, you can still do business,” said Barrie Williams, managing director, hotels, Christie & Co.  

Eagerness Steady

Asia’s investors have continued to show their enthusiasm for the region, with QMH announcing the sale of the 17-strong Bilderberg Hotels in the Netherlands, to a consortium led by Singapore’s First Sponsor Group and Germany’s Event Hotels, for an undisclosed fee.

The pair plan to further expand the Bilderberg brand in the Dutch market, one in which First Sponsor has been investing heavily in over the past few years, acquiring 21 such assets in the past 30 months. Amongst others, the group owns Arena Towers (Holiday Inn and Holiday Inn Express) in Amsterdam.

Earlier this year saw Amsterdam reach the fourth place of the Colliers International’s Hotel Investment Attractiveness Index, an analysis of the hotel investment climate of 20 European cities.

The broker said that: “Thanks to a growing number of international tourists, a high occupancy rate and a substantial average daily rate, Amsterdam became the number four hotspot in Europe.”

Dirk Bakker, head of EMEA hotels for the company, added: “Amsterdam scored high on the hotel performance with an occupancy rate of 78 percent and an average daily rate of €136. This is one of the best scores of all cities we analysed and underscores the growing interest in the city of travellers as well as investors.”

Those Asian investors looking to take China’s place may not have everything their own way. PwC forecasted “a small decline” in M&A this year, but said: “Outbound investment that is considered to be strategic in nature will continue to be encouraged. The other drivers for this activity will remain in place over the medium to long term. Consequently, PwC believes that outbound M&A will continue to reach new records in 2018.” 

Investors are encouraged to make hay in a a temporary lull.