Within a matter of days, Chinese investors have pumped a sum approaching $10 billion into U.S. hotels. The logic? They are making a play on the growth of Chinese tourism, both into the United States and by expanding their brands into Asia.
First China Life Insurance (LFC) , China's biggest insurer, led a group of investors who bought a $2 billion stake in U.S. hotels owned by Starwood Capital Group. That will give the investors 280 limited-service hotels in 40 U.S. states.
Then the Chinese conglomerate HNA Group, parent of the regional airline Hainan Airlines SH:600221, paid Blackstone (BX) $6.5 billion for a 25% stake in Hilton Hotels (HLT) . That extends HNA's international reach. In April, it already acquired Carlson Hotels, which owns the various Radisson chains, and took a minority stake in Red Lions Hotels.
The Hilton deal, announced on Monday, put a 16.5% premium on Hilton stock from its closing price on Friday. It also reduces Blackstone's stake to 21%, after the private-equity group acquired the hotel company for $26 billion in 2007, then listed it once again in 2013. Blackstone may now move towards exiting its investment altogether.
The U.S. hotel stocks are therefore worth watching as they draw Chinese investor interest. The math is based simply on the sheer number of travelers and where they're heading.
In 2015, there were 128 million Chinese travelers heading out of the country, up 10% over the previous year and also making up 10% of global outbound travelers around the world. The Asia-focused brokerage CLSA believes that by 2020 we will see 200 million outbound Chinese travelers, accounting for 14% of all travel. The brokerage highlights the luggage maker Samsonite (SMSEY) and the online-travel booking site Ctrip (CTRP) as major beneficiaries.
Tourism is a pretty new concept in China -- traditional time off was spent going back to celebrate with family. But as with many trends on the mainland, the situation is changing very fast.
For many mainland tourists, Hong Kong was the first destination they chose. The Chinese government allowed individual travelers to visit the city, which has separate immigration rules as a special unit of China, after the 2003 outbreak of SARS, to boost the retail business here. Macau, another special administrative region with its own rules, has been another top initial spot to visit, the only place in mainland China that casinos are legal.
But the Chinese tourists are now getting far more adventurous. At the start of this year, a CLSA survey of more than 400 outbound travelers revealed that if money was no object, the most highly desired destinations for Chinese tourists are the United States, France, the Maldives and Australia, in that order.
China's insurance companies have vast coffers of cash that they need to deploy. But they can't do that all at home. So the Chinese government has encouraged them to go abroad, something they first allowed in 2009.
London office property has been the first target of many large institutional investors from Asia. As far as Chinese insurers go, Ping An Insurance (PNGAY) was the first to strike a major deal in the City of London when in 2013 it purchased for £260 million (now worth $317 million) the "inside out" Lloyd's Building that houses the insurance market.
But the Brexit vote in June has halted much of the momentum into Britain -- probably only temporarily since the British pound's plunge has put property on a fire sale.
Major Chinese investors are expanding their horizons, just like the Chinese travelers. Fosun International (FOSUY) , a conglomerate that includes insurance and wealth-management in its portfolio, owns Club Med and is bringing that brand into China. The private conglomerate the Dalian Wanda Group owns the Ironman brand, the British luxury-yacht brand Sunseeker.
Most stunningly, Anbang Insurance, a company most people in China hadn't even heard of, burst onto the scene when it spent $2 billion on the Waldorf Astoria hotel, which seemed over-the-odds at the time.
Then it launched an even more-aggressive bid of $14 billion for Starwood Hotels & Resorts (HOT) . It wasn't clear whether it really had the funding, and with the Chinese sovereign wealth fund also interested, it seemed the mainland government quietly told Anbang to drop that idea. Marriott International (MAR) finally won the bidding war.
Too many Starwoods? Starwood Capital, the Greenwich, Conn., investment company involved in the China Life deal that was just announced, started Starwood Hotels, but exited its position in Starwood Hotels in 2000.
Anbang will undoubtedly back for more, as are other Chinese insurers in particular. Real estate meshes very well with their long-term obligations to those they insure. So don't be surprised if you hear Mandarin Chinese being spoken at the check-in desk on your next U.S. vacation, and its sing-song pitch echoing down the corridors.