TRAVEL: HNA Lodges in Brussels, Jin Jiang in Vienna

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Bottom line: Major new hotel acquisitions by HNA Group and Jin Jiang reflect a recent wave of domestic consolidation and global hotel buying by Chinese companies, and could culminate with a Jin Jiang bid for France’s Accor.

Jin Jiang buys Vienna Hotels

Two of China’s biggest acquirers from the travel sector are in the headlines today, both with very European-sounding investments. The larger of those will see HNA Group, parent of Hainan Airlines (Shanghai: 600221), purchase the Belgium-based owner of the Radisson hotel brand. The other will see Shanghai-based hotel operator Jin Jiang (HKEx: 2006; Shanghai: 600754) buy 80 percent of Vienna Hotels Group, a European-sounding name that is actually just a Chinese operator based in the southern boomtown of Shenzhen.

Both deals reflect a recent Chinese appetite for global hotel companies, including property owners and management firms. That appetite was on prominent display last month, when insurance company Anbang got in a heated bidding war for US-based Starwood (NYSE: HOT), owner of the Sheraton and Westin brands. Anbang bid aggressively against US operator Marriott (NYSE: MAR) in that battle, but ultimately bowed out under pressure from China’s insurance regulator. (previous post)

All that said, hotels remain a popular investment for Chinese buyers at the moment due to their mix of traditional real estate with the steady revenues they provide from guests. The latest acquisition frenzy looks similar to one more than 2 decades ago led by Japanese buyers, which ultimately ended in a big bust. Some have predicted a similar bubble may be building now, this time due to aggressive bidding by names like HNA and Jin Jiang.

Let’s begin with the deal involving HNA, which has agreed to buy Carlson Hotels Inc, operator of the Radisson and Park Plaza brands, according to a Bloomberg report. (English article; Chinese article) The deal would also see HNA acquire Carlson’s 51.3 percent stake in Rezidor Hotel Group, which owns the rights to open Carlson’s hotel brands in Europe, the Middle East and Africa.

The deal could kick off a process that ultimately sees HNA take over all of Rezidor, and would value Carlson Hotels at up to $2 billion. While that amount is quite large, it’s still far smaller than the $14 billion Anbang was offering for Starwood before it abandoned its bid last month. But it’s slightly more than the 1.2 billion euros ($1.3 billion) that Jin Jiang reportedly paid last year for Louvre Hotels Group, Europe’s second largest hotel owner.

That Louvre deal is a good transition into our second major news item, which will see Jin Jiang buy 80 percent of Vienna Hotels for a more modest sum of 1.6 billion yuan ($250 million). (Chinese article) This particular deal has been in and out of the headlines since last summer, and is part of a broader wave of consolidation in China’s fragmented domestic hotel industry. (previous post)

Small Potato

Vienna is a relatively small player, operating 565 properties in China at the end of last year. The acquisition follows Jin Jiang’s purchase last year of domestic rival Plateno, owner of the formerly New York-listed 7 Days hotel chain. This new deal also comes as the China Lodging Group (Nasdaq: HTHT), owner of the Hanting budget chain, forms a close alliance with France’s Accor (Paris: AC), operator of the Sofitel and Novotel brands.

But the big news in China’s global hotel buying spree could be a looming showdown between Jin Jiang and Accor, as the former seeks to purchase a major stake of the latter or even pursue an outright acquisition. That tale began early this year when Jin Jiang quietly purchased a major stake of Accor shares in the open market, and Jin Jiang is now reportedly in talks to boost that stake. (previous post)

Accor’s current market value is now about $10 billion, meaning it might be a bit too pricey for Jin Jiang to buy outright. What’s more, Accor doesn’t seem too excited about such a marriage, especially after it formed a major tie-up with China Lodging Group last year. Jin Jiang was also reportedly interested in making a bid for Starwood last year (previous post), and its latest purchase of Vienna shows it is determined to continue its acquisition spree and has the cash to do so.

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