When the ALIS conference kicked off, it is fair to say that the hotel and investment community ‘formally’ begins its year, it 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, the Hotel Investment Conference Asia-Pacific in Hong Kong, the Africa Hotel Investment Forum in Toga or HotelsWorld in Sydney.
So, what topics are likely to be discussed by the delegates and industry experts?
Aside from the obligatory conversations about the state of the industry and where the national lodging community is heading, discussions will evolve around capital markets and the level of financial liquidity.
The various panel discussions will offer 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/or investment markets.
There is one complex topic that forms part of the agenda which will particularly resonate with the global hotel investment community and thus 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 new 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,” says Andrew Hazelton, Managing Director at AETHOS Consulting Group (Philadelphia). “In 2015, another New York trophy asset " the Baccarat Hotel " was also acquired by a Chinese investor (Beijing-based Sunshine Insurance Company).
The big 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,” Hazelton adds. 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 in 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,” notes Georgianne Fsadni, Director and Practice Leader for Asia Pacific at AETHOS Consulting Group (Melbourne). 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,” saysThomas Mielke, Managing Director at AETHOS Consulting Group (London). “During 2015, we saw Fosun (China’s largest privately held conglomerate) buy French Club Med in a deal valuing the company at EUR €839 million, and Singapore’s Frasers Hospitality acquired the Malmaison and Hotel du Vin portfolio in the UK for a reported GBP £363 million“, he adds.
“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”, says Mielke. “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,” says Mielke.
“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(er)-risk, income generating stable property yields,” he adds. 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, Fsadni adds “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 neighbouring 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 big purchase this year (Intercontinental in Hong Kong (USD $938.3 million). Another few names we may become more familiar with could 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.
It is, 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 are contemplating to continue to make waves across ponds in all directions are not just Chinese investors " Singapore, Japan, Hong Kong and Korea amongst others, will all continue to play on despite the woes with the Chinese currency and stock market.
It will be interesting to observe whether any of these panel discussions at the upcoming conferences will talk about the consequences of such heightened activity " will new ownership be of the silent-investor type or will some of these Asian companies want to be more hands-on involved in the business?
If so, what can be learned for either parties involved? More news to follow.
Georgianne Fsadni, Director
Georgi’s 30 year career has taken her from New York to the Middle East and, more recently, to the Asia Pacific region. Her global hospitality experience includes hotel and restaurant management; strategic, financial, marketing and operations advisory; asset management; and principal investment and private equity. The breadth and diversity of her business acumen spans from corporate governance working with and on boards to strategic planning for family-owned business and not-for-profit organizations.
A common thread throughout Georgi’s career in the hospitality industry has been her passion for training, coaching, teaching, corporate ethics and sustainability. As a world traveler, avid reader and well-connected hotelier, she continues to stay on top of the trends and best practices that drive the hospitality industry at all levels.
Andrew Hazelton, Managing Director
“Benjamin Franklin famously said, “By failing to prepare, you are preparing to fail.” I live by this quote, both at work and at play. I enjoy testing myself mentally and physically and spend most of my time away from work training for a marathon or racing with an outrigger canoe team. Endurance sports force me to prepare and focus for the long haul; something that is transferable to every aspect of my life.
As an executive search consultant I am able to positively impact both organizations and individuals alike. I enjoy the challenge of helping our clients strategically align their business and human capital needs which ultimately better positions them for long-term success. I am fortunate to work closely with top leaders in our industry and provide them the opportunity to significantly advance their careers and personal goals.”
Andrew Hazelton is Managing Director at AETHOS Consulting Group. An experienced recruitment consultant, he has over a decade of retained executive search experience in a variety of industries, including hotel, restaurant, gaming, real estate, finance, and technology. Prior to joining AETHOS Consulting Group Andrew was with HVS Executive Search and spent six years with Korn/Ferry International. Throughout his career he has been responsible for completing a number of C-suite searches globally. He has authored a number of articles on executive selection, general HR trends and compensation for the hospitality industry. Andrew is a graduate of The Pennsylvania State University, an active alumni member, and a member of the Penn State Hotel and Restaurant Society.
Thomas Mielke, Managing Director
“Assisting clients through a phase of transition, and knowing that my involvement made a direct and measurable impact on their success, is a constant source of inspiration. Ultimately, this is what keeps me motivated, and what has led to my move into human resources consulting.”
As a founding partner of AETHOS Consulting Group, Thomas has a track record in successfully placing senior executives at leading hospitality companies across the EMEA region. He is an AESC certified consultant and is working together with travel wholesalers, real estate development firms, investment companies and sovereign wealth funds as well as leading restaurant brands in identifying key talent and has joined forces with clients in establishing compensation schemes as well as organisational structures and workflows.
Thomas strongly believes that HR and Talent Management should be regarded as a vital component of a firm’s roadmap to success. Acting as a trusted advisor, he supports the process of identifying, developing and/or enhancing those values and best practices that define and foster a corporate culture and help create a core competency centred around people. He is passionate about organisational advisory, learning and development and has authored a number of articles on leadership, corporate governance, emotional intelligence and managerial core competencies that predict job performance within hospitality. Thomas began his career within human resources and organisational advisory with HVS Executive Search and is a graduate of Ecole hoteliere de Lausanne, holding a BSc. in International Hospitality Management.
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