Chinese investment in UK hotels expected to grow

Savills' UK Hotels report said the anticipated influx of Chinese visitors to the UK has buoyed confidence amongst upscale Chinese hoteliers.

So far, most investment has occurred in London, with six more Chinese and Hong Kong-owned hotels due to open in the capital over the next three years.

However, upscale brands are starting to move away from the centre of the city to emerging areas, with Dorsett opening a Shepherds Bush hotel​ later this year and Wanda Group​ is planning to spend £700m on a luxury hotel on the South Bank.

Chinese brands are also starting to open outside of London. For example Pentahotels​ – owned by Hong Kong’s Rosewood Hotel Group – is planning to open six regional hotels around the UK next year.

While the spread of Chinese and Hong Kong brands has been limited to upscale hotels, there may be opportunities for mid-market and budget brands from China to enter the UK market “given the accelerated growth forecast in independent travellers from China and their focus on price," the report said.

China investment​

So far, Shangri La Hotels​ is the only top 10 Chinese hotel group to operate outside of the domestic market. However, with supply exceeding demand in China, operators are likely to start looking further afield.

Rather than expanding existing Chinese brands into new markets, investors will focus on brand acquisition, said the report. For example, in 2011 Hong Kong based New Wold Hospitality recently bought luxury US brand Rosewood Hotels for US$229.5 million, which it is now expanding into the UK​.

In total, Chinese investment is forecast to account for 10% of global cross border hotel volumes by 2017.

“While this growth in cross border investment is likely to be primarily focused on the wider Asia Pacific region, we expect to see Chinese interest in UK, namely London hotels, to pick up,” said the report.

“Hong Kong and mainland Chinese purchasers have acquired 18 hotels and development sites in the UK over the last five years spending close to £450m - only 8% of total overseas investment in UK hotels.

“Our estimate is that over the next three years activity by this group could more than double with annual average volumes in excess of £200m.”

Five facts about Chinese tourism:​

• China is now the biggest source market for outbound tourism overtaking the Americans and Germans with estimates that Chinese outbound overnight visits hit 95 million in 2013.
• Europe accounted for approximately 9% of these trips last year and Chinese visitor numbers to Europe could reach 24.5m by 2030.
• Although the UK has lagged behind other European countries, Chinese visitors to the UK are expected to hit 650,000 by 2020, with numbers boosted by a simplified visa system and a targeted marketing campaign.
• Chinese tourism to Europe and the UK is currently dominated by tour groups, which typically spend 40% of their budget on shopping so are price conscious when it comes to accommodation.
• According to a recent Boston Consulting Group (BCG) report, the fastest growing Chinese visitor segments through to 2030 will be 'young affluents' aged 18 to 30 years; 'senior professionals' aged 45 to 55 years travelling without a tour group; and small groups of friends/family travelling without a tour group.