Chinese firms have been very active in buying American Hotels in the recent years. This year, a Chinese firm, HNA Group, will be the largest shareholder in the hotelier if they follow through with their announcement that they are going to buy a 25% stake in Hilton Worldwide Holdings. This hotelier includes brands such as Conrad, Embassy Suites, and the Hampton Inn.
"In April, an HNA division announced it was buying Carlson Hotels, which
owns Radisson and several other brands. Last month, Anbang Insurance
Group completed the purchase of 15 American hotels in a deal worth more
than $5bn, including the JW Marriott Essex House in New York, the Westin
St. Francis in San Francisco, the InterContinental in Chicago, a Four
Seasons in Washington, DC, and two Ritz-Carlton resorts. And just last
week came the news that China Life Insurance Co. is leading an
investment group that is buying a $2bn stake in a collection of 280
American establishments. And just last week came the news that China Life Insurance Co. is
leading an investment group that is buying a $2bn stake in a collection
of 280 American establishments."
There are a few reasons why buying hotels for aviation and insurance companies is a good idea. The first reason is that the Chinese view American hospitality industry as a safe space to invest their money. The second reason is that it is a form of vertical integration in the tourism industry. "The recent slowdown in
Chinese economic growth has caused jitters at home and prompted more
investments abroad." Around 2 million Chinese people visit America each year, and is supposed to rise to over 3 million by 2020.
Chinese are hoping to receive as much of the $70 billion+ that tourists from the mainland spend abroad and at home this year. By buying/investing in American hotels, the Chinese are going to be able to control the entire travel process for Chinese travelers.
http://www.economist.com/blogs/gulliver/2016/10/rooms-growth
The Chinese realize the gains to be made in foreign investment are huge. Rather than creating a destination for tourist, they want to make profit off the travel process too. They want to promote excellence in service, it's how you weed out the competition.
ReplyDeleteI agree, the Chinese seem to be investing a lot into foreign countries, but smartly too. I like how they have targeted buying hotels for aviation and insurance companies which could result in a stronghold for the Chinese travellers travel process.
ReplyDeleteThe Chinese are investing a lot into foreign companies, because of the recent slowdown in their economic growth. Investing in American hotels is highly profitable since around 2 million chinese people visit American each year, and this facilitates tourism for chinese travelers. Usually Investments abroad is a high risk strategy, but the American hospitality industry is a safe investment. This could also lead to increased employment of chinese workers in the United States, who have an incentive to work at those hotels. It is interesting to see whether local American are displaced in working in those hotels in the future.
ReplyDeleteIt is true that people in China believe investing in foreign countries will bring back big profit, it is now becoming a trend in China, even for start-up companies they will invest in other countries and show that they have strong financial power and are going global.
ReplyDeleteChina's large investments may help bring their struggling economy back continuing to raise their GDP for their rapidly growing population. Also, if Chinese workers start working for American company's in the U.S., their GNP will increase.
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