At NATHIC, FDI put under the microscope

MIAMI--The 2015 edition of the North America Tourism & Hospitality Investment Conference here at the Fontainebleau Miami Beach turned its attention on cross-border investment into North America and one thing is certain, there are investors at the ready.

Foreign direct investment (FDI) into hotels, in the Americas, hit $4.2 billion in the first half of 2015, and the trend toward more transactions and development is unceasing. 

Barry Johnson, the founding executive of SelectUSA and now a principal of 32 Advisors, referred to FDI as a "full-contact sport," with cross-border investment acting as an accelerant to boosting a local market economy.

In regard to hospitality, Johnson noted that FDI is as much an investment as it is an export. "When a Japanese investor comes and invests in hotels, there is a line to tourism," he said.

Johnson acted as a voice of FDI; a panel of global developers and brands discussed what's going on from the inside. One of which, Derek Cheung, the CEO of New Century Asset Management, a China-based REIT, said he is actively searching for deals in North America, specifically via acquisition. "We want to extend our network in North America, where, unlike Europe, we aren't as strong," he said.

One of the larger FDI deals in recent times is Anbang Insurance's nearly $2-billion buy of the Waldorf Astoria from Hilton Worldwide. As Matt Sparks, SVP of luxury and corporate development at Hilton Worldwide, said, "it allowed us to reinvest proceeds from sale toward other real estate."

This is one example of how FDI is a pure benefit for the buyer and seller. "The deal freed up capital for Hilton," said Johnson. "The Waldorf is not being taken to China."

FDI is not necessarily a "bad thing," as Brian McGowan, EVP and COO of the Metro Atlanta Chamber of Commerce, put it. "It’s an injection of capital."

Meanwhile, the big gun on the panel, so to speak, was Wanda Hotels' deputy general manager, Eddy Tiftik. China-based Wanda owns and operates hotels, and has a reputation for being able to consummate deals easily due to its cash position. "I won't deny it," Tiftik said, "but I may need to. Our reputation is all over investment around the world, buying what we can. But we are not walking around with bags full of money."

Wanda in recent times has changed its strategy from being an owner to an operator and competing on the global stage with the likes of Marriott and Hilton, to name two. It has around 100 hotels open now and its own brand, Vista. 

North America: In Their Sight
Hilton's Sparks parsed North America in its parts. "North America has had a good run over last few years," he said. "The change in government in Mexico has been a stimulus and given a reason for investors to look again. Meanwhile, Canada reflects a toned-downed version of the U.S. Canada historically has been more stable, but doesn't see the big run ups and lows magnified.

"Our goal is to have product where customers want to go. Having product there is important to guest and strategy. Not as much about a return."

Cheung is concentrated on the U.S. as an investment vehicle, calling it more mature than Canada, for example. 

In regard to Wanda, Tiftik said they can create the destination. "We are not scared about entering any market," he said. Wanda has recently done deals in Chicago and New York.

Specific to the U.S., McGowan said Atlanta is now working to become a true global city. Its done that by improving its airport and adding cultural attractions, such as museums. "It's meant to signal to the global community that Atlanta is a smart, safe place to invest," he said. "We don’t necessarily see Charlotte as a competitor. We see global cities like Beijing and Shanghai as competitors. The global city is truly connected and welcoming to international visitors and investors."

In regard to how deals are getting done, Sparks said that buying an asset is a simpler equation than building new. "Clearly, buying is less risky," he said. "The minute you put a shovel in the ground, there could be problems. And during that [build] period, there's no income. If you buy, right away there is."