CATEGORIES: Global Assets, Hotel Intel

China-based Investor Seeks to Dominate U.S. Hotel Industry

China-based Insurance Company, Anbang Insurance Group Co. has a contract in place to buy Strategic Hotels & Resorts Inc. for $6.5 billion from Blackstone. Strategic owns 16 U.S. hotels, with all but one competing in the luxury sector. Its hotel portfolio includes Fairmont hotels in Chicago and Scottsdale, Arizona; five Four Seasons hotels; two Ritz-Carlton hotels; and the Montage Laguna Beach in Southern California. The acquisition of Strategic Hotels gives Blackstone a profit close to $500 million, after just 3 months of ownership. Blackstone acquired Strategic in December 2015 for $6 billion, taking the company private with the intention to sell the individual assets during its hold period.

Fairmont Scottsdale, Arizona. Image source:
Fairmont Scottsdale, Arizona. Image source:

When it was founded in 2004, Anbang initially focused on car insurance. However, it has completed deals worth more than $30 billion dollars in the last eighteen months, moving from near obscurity to the top of global real estate and finance. The insurance company is making a big push in the U.S. hotels sector as it is concurrently leading a group that has bid $12.8 billion for Starwood Hotels & Resorts. It should be noted that Marriott International already has an agreement to acquire Starwood for $12.2 billion in what was poised to become the largest hotel chain in the world.

In February 2015, Anbang also acquired the 181-room boutique hotel, Waldorf Astoria New York from Hilton Worldwide in a world-record deal valued at $1.95 billion ($1.4 million per room) and said it would invest in a major renovation. The property will continue to be managed by Hilton under a 100-year management agreement.

Chinese investors have sought to buy prestigious U.S. properties believing that it will benefit a growing number of Chinese travellers abroad. The global market volatility, continued strength of the U.S. dollar and increasing need to diversify investment portfolios using commercial real estate are the main drivers of U.S. trophy assets.

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