Chinese investors eye a giant tourism boon

Chinese tourists spent a record $US164.8 billion ($208bn) overseas last year, according to official figures, but that amount looks set to be dwarfed by a tsunami of money that is following their now well-trodden path.

Some of the country's biggest investors have been snapping up brands, property and other assets across the globe to serve as a magnet for China's booming outbound tourist market. 

Last year, Chinese tourists made more than 100 million trips overseas, but CLSA expects that number to double to 200 million by 2020.

Just this week, Wanda pledged to invest $1bn for development in the Sydney CBD. Across the harbour, Fosun partnered with Sydney-based Propertylink to buy an office tower in North Sydney for $116.5 million. 

Both companies have already made a splash in the Australian market with Wanda already acquiring a controlling stake in a $900m-plus Gold Coast property in August that it hopes to turn into a luxury hotel and serviced apartments complex. Late last year, Fosun completed the acquisition of local oil and gas firm Roc Oil for $439m.

Fosun's chairman Guo Guangchang sees these steps into the Australian market as just the beginning. “After the acquisition of ROC Oil in November 2014, we are happy to see that we can contribute more to the Australian economy,” he said in a statement this week.

“The Australian property market is well known for its stable growth and transparency. It is also the reason why Australia attracts so much attention from Asian investors including from China,” he said.

The company has been on an overseas spending spree of late drawing heavily on funds made available after its strategic acquisition of Portuguese insurance company Caixa Seguros. That purchase has allowed the company to snap up brands and companies without taking on more debt.

The strategy draws directly on that of Warren Buffet. Guo is unabashedly a devotee of the oracle of Omaha, and the philosophy graduate has shown a similarly deft touch for investments.

Among the company's most recent acquisitions are a $725m purchase of the Chase Manhattan building in New York City, London's Lloyds Chambers building and, after over a year of battling, French regulators have cleared the way for it to buy the holiday resorts group Club Med. 

Jeffrey Towson, a managing partner of private equity firm Towson Capital and a professor of investment at Peking University, says the Club Med deal is a strategic platform for Fosun.

“Fosun likes to compare itself to Warren Buffett,” says Towson, "but the Club Med deal is actually very similar to what my old boss Prince Alwaleed did."

“He made his first fortune in an emerging market. They he used that to buy premier hotel brands in the West like the Fairmont and Four Seasons. He used these strategic platforms to start doing deals all over the world -- especially in emerging markets. "

The slew of overseas purchases may at first glance look like a scatter-gun approach, but the unifying principle to all of them is a strategy to capitalise on China's growing affluence.

Towson says, Fosun can use Club Med to grow with China's booming tourism market. Transitioning Chinese consumers is a major focus for Fosun and that ClubMed is a real unique asset in that regard, Towson says.

"And as Fosun is the largest shareholder of Focus Media, which boats over 300 million views, they have an ability to really promote Club Med to Chinese tourists, which are increasing rapidly anyway."

Fosun's Club Med purchase latches onto a trend that is beginning to transform how Chinese investors behave in foreign markets, and it's something Australians should pay attention to. As Chinese outbound tourism numbers have grown, so too has the sophistication of these travellers.

"A lot of early tourism was about buying luxury products says Towson. “And then it became about buying homes overseas. This year they are buying apartment buildings. Basically, via growing tourism, Chinese consumers have discovered the world is full of nice assets to own."

Gary Bowerman, author of the new book The New Chinese Traveller, says that Fosun will first use the Club Med purchase to meet the evolving demands of short-stay and weekend Chinese holidaymakers domestically, but that ultimately it has bigger ambitions.

"Fosun will want to graduate domestic Club Med travellers to its resorts in Europe and worldwide, and in that sense purchasing Club Med gives it a ready-made tourism eco-system that it can mould and nurture to meet the changing desires of Chinese travellers, both at home and abroad" he says.

Looking beyond the Fosun deal, Bowerman sees Chinese investment in global tourism assets as starting to underscore the increasing overlap between domestic and outbound tourism. 

Chinese investors see huge opportunities both in buying and adapting existing tourism and hospitality concepts and creating new ones for domestic travellers, and then expanding those portfolios overseas argues Bowerman.

The trend can be seen in Jin Jiang's recent purchase of the Louvre Hotels portfolio of brands, and Hainan Airlines increased stake and established a joint venture in China with Spain's NH Hotels.

Dalian Wanda, whose strategy of purchasing real estate in major cities, such as Madrid, London and Beverly Hills, is working towards creating a portfolio of 150 luxury hotels, both in China and around the world.

Like Japanese investors before them, these Chinese developers want the ever-growing legion of Chinese tourists to shop, dine and play at their owned properties around the world, including Australia.