Australian hotels still benefitting from Chinese investment
Chinese investment into Australian hotel property has been prolific over the past three years and investors from China will continue to play an important role.
“Not only did the Chinese inbound figures pass the ‘magic million’ mark in the past year – an increase of over 19 percent on the year to April 2016 – but Chinese tourists now account for 23% of total expenditure (over AUD 7 billion) by overseas visitors,” said Peter Harper from Investment Sales in JLL’s Hotels & Hospitality Group.
In 2009, Chinese tourists to Australia numbered less than 350,000, and tourists could only fly from five Chinese cities. Today, they can fly direct from ten cities, and the prospects for further expansion in the future were highlighted by last month’s announcement by China’s biggest private airline operator, HNA Group, to take a 13% stake in Virgin Australia for AUD 159 million.
This was followed shortly by China’s Nanshan Group’s announcement that they would buy Air New Zealand’s 19.9% stake in Virgin for AUD 260 million.
Chinese investors have picked up some of the cream of Australia’s hotel crop in the past few years, including Sunshine Insurance agency’s AUD 463 million purchase of Sydney’s Sheraton on the Park, followed closely by an entity associated with Bright Ruby’s purchase of Hilton Sydney for AUD 442 million. Chinese investors also acquired the Park Hyatt Melbourne and transformed the former Sydney Metropolitan Water Sewerage and Drainage Board headquarters in Pitt Street, Sydney into the five-star Primus Hotel.
While these acquisitions demonstrated the Chinese appetite for buying premium ‘trophy’ assets in CBD locations, the purchase of the Adina Mascot, Clarion on Canterbury Melbourne, Esplanade River Suites Perth and Il Mondo Boutique Hotel Brisbane also reflects a willingness to invest in a range of hotel assets across emerging commercial districts or fringe precincts.
While the Chinese economy has undoubtedly cooled in recent times, and Australian governments have become more restrictive about Chinese investment into some real estate sectors, the flow of funds into tourism continues.
The tourism and hotel industry will always be cyclical, and the past decade has shown that there can be surprises along the way, but the experience over the past three years suggests that, while the Chinese hotel investment boom in Australia might not continue to grow at the rate it has in recent years, their future ‘down under’ should be long-term and sustainable.
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