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Waking Up: China’s Hospitality Transactions On The Rise

As the world’s economy is gradually regaining pace thanks to ever-increasing vaccination rates, easing travel restrictions, and generally improving consumer sentiment, China once again aims to take the lead. The country’s economy is expected to grow an impressive 8.5% in 2021, according to the latest data from the World Bank, with most cities managing to cope with the pandemic demonstrating zero cases for months. By the end of June, 40% of the population was vaccinated – one of the highest rates worldwide – with the government aiming to achieve 70% by the end of the year. All this together with a push for a wider economy reopening has certainly created a favorable climate for investment.

Hospitality cash holders quickly jumped on the train. According to recent research by JLL, a total of US$1.3 billion was transacted in the hotel and serviced apartments deals in China in the first six months this year, a 54% jump from the relevant period a year earlier, when havoc wrecked by covid-19 made investment a much riskier business. With such numbers, China is leading the activity in the Asia Pacific, along with Japan and South Korea.

What are the main drivers behind this positive shift? The bustling domestic tourism industry is certainly at least one of the contributing factors, says said Lucia Leung, associate director of research and consultancy for Greater China at Knight Frank. During the seven-day Labor Day holiday this year, China recorded 230 million domestic trips, a 120% surge from last year. It matched the numbers from the relevant period in 2019, signaling the potential return to adequacy in the country’s domestic tourism market. Fang Zexi, an analyst at the research institute of travel service platform, brings even more good news forecasting “an explosive surge in tourism demand and it could be even higher than in 2019”.

As to the geography, Shanghai continues to take lead as a top investment destination, contributing one-third of the total transaction volume. In February, Zhongrong International Trust sold its Lanson Place Jinlin Tiandi in Xintiandi shopping neighborhood for 1.35 billion yuan, while Jiecheng Capital paid Ascott Residence Trust 1.05 billion yuan for Somerset Xu Hui in Shanghai, a 32-storey service apartment with 168 rooms. The largest deal was signed in Beijing though. New-York based Tishman Speyer, and its Chinese partner Shanghai Dowell Trading spent 2.05 billion yuan on a luxury hotel-apartment property in January.

Overall, JLL is expecting the hospitality transaction volume in the country to exceed US$2 billion this year, hitting the per-covid statistics, with “older hotels with repositioning or conversion angles continuing to be sought-after by domestic and foreign investors alike”. Hopefully, no more spooky surprises in the form of pandemics, social, or political unrest are waiting for us around the corner, and this positive forecast can indeed turn into reality.

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