A new generation of affluent Chinese are not only flocking to Australia for holidays – some are building a vested interest in the country’s tourism boom by buying up some of its well known hotels.
Chinese money accounted for a third (by volume) of Australian hotel transactions last year with investors picking up some big names such as Hilton Sydney for AU$442 million, and in 2014, Sydney’s Sheraton on the Park for AU$463 million.
“Chinese investors have picked up some of the cream of Australia’s hotel crop in the past few years,” says Peter Harper, Senior Vice President for Investment Sales, JLL Hotels & Hospitality.
Besides snapping up pricey Central Business District locations, Chinese investors have also looked at fringe and emerging districts, having bought the likes of Adina Apartment Hotel Sydney Airport, Clarion on Canterbury in Melbourne, Esplanade River Suites in Perth and Il Mondo Boutique Hotel in Brisbane. Such transactions that highlight their new confidence in the Australian hotel market, Harper adds.
This investment in hotel opportunities mirrors a major influx of Chinese tourism dollars flowing into the country thanks to a favourable exchange rate and its growing middle class.
The latest figures speak for themselves: In 2015, Chinese visitors accounted for Australia’s second largest market for visitor arrivals and the largest market by total expenditure and visitor nights. Visitors from China spent a total AU$8.3 billion (US$6.2 billion) during their holidays, a number that is estimated to increase to AU$13 billion by 2020.
Changing perspectives on Chinese tourism
All of this is a far cry from the picture of Chinese tourism in Australia less than a decade ago. In 2009 visitors could only fly in from five Chinese cities, and there were few Chinese tourists to be seen in Australia. What changed the landscape entirely was the 8,000 Amway five-star-only incentive group that visited Sydney in 2011, bringing in over AU$40 million for New South Wales.
That visit prompted a strategic shift in mind-set, with hoteliers such as AccorHotels establishing China-focused initiatives to woo more spenders from the country and customising their service standards to meet Chinese cultural expectations.
Hotel groups began to see potential in securing long-term demand, in view of the Chinese preference for top quality accommodation.
Fast forward to today, and Chinese visitor numbers passed the 1 million mark for the first time in 2015. Improved air connections are helping: tourists can now fly directly from 10 cities in China. Plus, air access could further improve after Chinese conglomerates bought significant stakes in Virgin Australia – HNA Aviation Group is taking a 13 percent and Nanshan Group a 19.9 percent stake.
“This success in attracting Chinese visitors to Australia has clearly played a major role in encouraging Chinese investors to buy Australian hotel properties too,” observes Harper.
The big Chinese shake-up
Until recently, the market was dominated by investment from Southeast Asia and Hong Kong. However, the last three years have seen Chinese investors pile in – and they’re in for the long-term, according to Harper.
Despite a cooling Chinese economy and Australian governments restricting Chinese money in some real estate sectors, funds from China continue to flow into Australian tourism destinations, with investors attracted by Australia’s economic stability and the record breaking performance of the hotel sector in cities such as Sydney and Melbourne.
As Harper notes, “while the Chinese hotel investment boom in Australia might not continue to grow at the rate it has in recent years, their future ‘down under’ should be long-term and sustainable”.
Moreover, Australia’s attitude towards Asia has itself changed, with the country growing its commitment to the continent, following efforts to reach out by top political leaders, such as former PM, Kevin Rudd and current PM, Malcolm Turnbull.
Indeed, as Chinese tourists and investors get a taste for Australia, they’re likely to play an increasingly important role in the country’s tourism and hotel landscape in the coming years.
