With the ALIS conference in full swing last week, it is fair to say that the hotel and investment community has officially launched into 2016. ALIS is a foretelling summit which sets the tone for events around the globe to follow - whether it is the International Hotel Investment Forum in Berlin (IHIF), the Hotel Investment Conference Asia-Pacific in Hong Kong (HICAP), the Africa Hotel Investment Forum in Toga or HotelsWorld in Sydney.

So, what are the hot topics for this new calendar year? Aside from the obligatory conversations about the state of the industry and where the national lodging community is heading, discussions evolved around capital markets and the level of financial liquidity. The various panel discussions offered insights into the thoughts of the industry's movers and shakers whilst the numerous networking opportunities will allow participants to exchange their views on the hottest development and investment markets.

There is one complex topic that forms part of the agenda which particularly resonated with the global hotel investment community and thus will form the basis for in-depth discussions at other upcoming hospitality conferences around the globe: The increased activity of Asian investors, globally. Although it is certainly not news, increased activity from Asian investors in various parts of the world is particularly interesting as it significantly influences relationships between owners and brands; which brands will prevail as the most desired by this discerning group of investors? It also certainly impacts the labour required, as new Asian investors will want to have someone of trust in positions such as asset managers, developers and project managers. The cultural fit to create seamless relations between the various cross-cultural parties will be crucial.

  • In the US, we all read about Chinese Anbang Insurance acquiring the New York's Waldorf=Astoria hotel for a reported USD €1.95 billion. In 2015, another New York trophy asset - the Baccarat Hotel - was also acquired by a Chinese investor (Beijing-based Sunshine Insurance Company). The over-arching rumour of the year, though, was whether or not Starwood Hotels & Resorts would be taken over by either of three Chinese suitors - the Chinese sovereign wealth fund China Investment Corp, hotel group Shanghai Jin Jiang International or the conglomerate HNA Group. This activity whether rumoured or transacted continues to indicate the perceived confidence Asian investors have in US trophy assets and big brands. And this trend is expected to continue into 2017.
  • In Australia, Sunshine Insurance made headlines buying the Sydney Sheraton on the Park for a reported AUS $463 million (2014). Sunshine was reportedly also in the running to purchase the Westin Sydney along with Bright Ruby Resources. At the race finish, it was a joint venture between Singapore developer Far East Land and Housing Development Company Pty/Ltd and the Hong Kong-based Sino Land Company Limited, which entered into an agreement to acquire The Westin Sydney and its adjoining Heritage Retail podium for AUS $445.3 million. Bright Ruby Resources, however, did purchase the Sydney Hilton for AUS $442 million on a leaseback arrangement. What does this tell us? Are Asian investors geographically indifferent?
  • In Europe, according to research published by global advisory firm CBRE, Asian investment was expected to reach approx. EUR €20 billion in 2015 - and this number was for Europe only. In 2015, we saw Fosun (China's largest privately held conglomerate) purchase French Club Med in a deal valuing the company at EUR €839 million, and Singapore's Frasers Hospitality acquire the Malmaison and Hotel du Vin portfolio in the UK for a reported GBP £363 million. Other noteworthy transactions included Hong Kong's HK CTS Metropark Hotels Co Ltd. takeover of UK Kew Green Hotels (GBP £450million) as well as Shanghai Jin Jiang's EUR €1.3 billion acquisition of Europe's second largest hotel group - Groupe du Louvre.

At first, it was the Asian REITS as well as high-net-worth-individuals who became increasingly attracted to the European hotel real estate arena and who were keen to acquire what most of us would describe as trophy assets. Subsequently, though, given the liberalisation of outbound investment in markets like China, we have seen a lot more activity from insurance companies and other parties looking for low-risk, income generating stable property yields. However, some of the early Asian investors are now starting to pull out of certain markets or at least reap the rewards of strong pricing levels. Hong Kong's Cheng family has, for example, reportedly put its London Rosewood Hotel on the market at three times the amount it originally paid. Many believe, though, that capital is just being re-directed and diversified into other high-yielding markets in Continental Europe.

On that same note, with the devalued Australian dollar and tourism on the rise, many Asian investors are also looking Down Under for high yields. According to CBRE, in the first half of 2015, more than AUS $2.5 billion worth of hotel transactions were completed in Australia (and points out that is second in number of transactions behind Japan and just ahead Hong Kong in total transaction value). CBRE notes the strong connection between Asian buyers and Australia - most of whom have visited, studied or worked in this neighboring country.

According to other studies including Saville's World Research on Asia Pacific published in third quarter 2015, the outlook for Asian investment in Australia and Japan continues to look good with secondary markets like Indonesia, India and the Maldives picking up interest. We believe the global hospitality market can expect to see some names like Gaw Capital in the mix - following up on their significant purchase this year (Intercontinental in Hong Kong (USD $938.3 million). Other names to look out for include Bonvests Holdings which acquired the Four Points in Perth, Hoshino Resorts which acquired the ANA Crowne Plaza Portfolio in Japan, and Minor International which has also been making a splash in Europe as well as down under.

Of course, concerns regarding the slow-down of the Chinese economy which will continue to generate plenty of discussion. It is important to note that the Asian investors we assume will continue to make waves are not just from China. Singapore, Japan, Hong Kong and Korea amongst others, will all continue to move forward despite the woes with the Chinese currency and stock market.

It will be interesting to observe whether any of the panel discussions at the upcoming hospitality investment conferences will talk about the consequences of such heightened activity. Will new ownership be of the silent-investor type, or will some of the Asian companies want to be more hands-on involved in the business? If so, what can we learn from this? More to come.

Leora Lanz (for AETHOS)
LHL Communications
AETHOS Consulting Group