Chinese investors will increase their share of global hotel acquisitions from 4% to 10% by 2017.
According to Savills, the Asia Pacific regions and the UK, in particular London, are set to benefit the most from the rise in investment in line with the expansion of overseas Chinese tourism.
Investment into individual hotel assets will increase as the momentum of wider real estate and infrastructure investment continues into the UK. The firm also states that it has seen a growing number of Hong Kong and Chinese hotel groups looking to establish their own brands in the UK in order to capitalise on the growth in Chinese visitors. However, there may also be further Chinese investment in the form of corporate acquisition.
The proposed streamlining of visa regulations for Chinese visitors to the UK could boost visitor numbers, which would initially benefit large budget hotels in the city fringe locations. However, as Chinese travellers become increasingly more sophisticated and in turn their reliance on tour group travel diminishes, Savills believes the popularity of budget and mid-market hotels in core locations will rise, in particular amongst those international brands that are already established in mainland China such as IHG, Accor and Starwood.
Hong Kong and mainland Chinese purchasers have acquired approximately 18 hotels and hotel development sites in the UK in the past five years spending close to £450m. The firm estimates that in the next three years activity by this group could more than double with annual average volumes in excess of £200m.
Giles Furze, associate director of hotel valuation at Savills, said: “An increase in Hong Kong and Chinese brands would be an exciting development for the UK market but in the short term we do expect this to be relatively limited due to current levels of Chinese visitors. Major international operating groups will instead continue to develop sub brands suitable for local markets, and will benefit from cross-border group awareness and loyalty.”
Marie Hickey, associate director of research at Savills, added: “The faster growth in independent Chinese travellers to the UK means that location and reputation will become increasingly more important when selecting accommodation providing opportunities for Chinese operators to enter the UK market. However, we suspect that this is unlikely to be on a large scale. While there will be operators, particularly in the upscale sectors, that will make the leap into UK and European markets, for the Chinese budget and midmarket brands the initial focus is likely to be on the wider Asia Pacific region.”
