In April it was announced that China’s HNA Tourism Group is acquiring a 51.3% stake in Rezidor Hotel Group, which owns Club Carlson hotels.
Chinese companies trying to buy stakes in major international hotel chains is nothing new, as we recently saw Anbang and Marriott get into a bidding war over Starwood.
Well, it looks like HNA Group is continuing with their hotel investment strategy. It has just been announced that HNA Group will buy a roughly 25% stake in Hilton from Blackstone, for a price of roughly $6.5 billion. Per the press release:
Hilton Worldwide Holdings Inc., HNA Group and Blackstone announced today that HNA will acquire an approximate 25 percent equity interest in Hilton from affiliates of Blackstone, establishing a long-term strategic investment in Hilton and Hilton’s planned spin-offs of Park Hotels & Resorts and Hilton Grand Vacations.
The transaction is valued at approximately $6.5 billion, or $26.25 per share in cash, reducing Blackstone’s interest in Hilton to approximately 21 percent. The transaction is expected to close in the first quarter of 2017. Following Hilton’s previously announced spin-offs of Park and HGV, which are expected to occur on or about the end of the year, HNA will own approximately 25 percent of all three companies.
The deal is expected to close in the first quarter of 2017. HNA Group won’t be able to sell its stake in Hilton for two years, and won’t be able to increase its holdings to more than 25 percent without Hilton’s consent.
Ultimately this is different than when Anbang tried to buy Starwood, given that HNA Group isn’t getting a majority share here. Overall I suspect HNA Group is primarily looking to diversify their assets.
However, unlike Anbang, HNA Group is actually involved in the tourism sector, and even owns stakes in airlines like Hainan. Long term it’s certainly possible that the goal here is to increase Hilton’s footprint in China, and perhaps even link some of the existing brands they have stakes in. After all, China is the largest outbound tourism market in the hotel.
Here’s what leaders of Hilton, HNA Group, and Blackstone had to say:
“We are pleased to welcome HNA Group as a long-term investor and strategic partner,” said Christopher J. Nassetta, president and CEO of Hilton. “HNA Group has a broad portfolio of successful travel and hospitality businesses and a proven track record of creating value in this industry. We believe this mutually beneficial relationship will open new opportunities for our brands and guests around the world, particularly in light of HNA’s strong position in the fast-growing Chinese travel and tourism market, the largest outbound travel and tourism market in the world.”
“Hilton is an iconic global hospitality company with an unmatched portfolio of high-quality brands and a reputation for operational excellence,” said Adam Tan, vice chairman and CEO of HNA Group. “This investment is consistent with our strategy to enhance our global tourism business, and we look forward to working together on new initiatives that leverage our respective strengths, expertise and tourism platforms to provide travelers more choice, value and world-class services.”
“Since our initial investment in Hilton nine years ago, the company and its leadership team have delivered phenomenal results,” said Jon Gray, global head of real estate, Blackstone, and chairman of the Hilton Board of Directors. “We think the company’s future is bright, and this long-term investment from HNA Group only adds to its potential.”
Bottom line
Chinese companies sure are getting active in the international hotel sector. My hope is that the primary goal here is for them to diversify their assets and perhaps grow their brands’ presence in China, and that we won’t see too many negative changes as a result of these kinds of investments.
What do you make of HNA Group buying a 25% stake in Hilton?
Having lived and worked in China for 15+ years, I am skeptical. Hainan has a well-deserved reputation of being a nest of corrupt vipers. HNA and Hainan Airlines do not have exactly stellar reputations for financial acumen or transparency. My hunch is that Blackstone is ok with this as they realize the best days of the US hotel market are closing fast. I also have little doubt that the Chinese government made it very plain...
Having lived and worked in China for 15+ years, I am skeptical. Hainan has a well-deserved reputation of being a nest of corrupt vipers. HNA and Hainan Airlines do not have exactly stellar reputations for financial acumen or transparency. My hunch is that Blackstone is ok with this as they realize the best days of the US hotel market are closing fast. I also have little doubt that the Chinese government made it very plain to Blackstone and Hilton that Hilton's expansion and continued presence in China would 'more secure' if they allow HNA and Anbang to launder some of their ill-gotten gains by investing in US shares and real estate. The fun will start when HNA demands rock bottom prices for their US-bound tour groups and the property owners on which Hilton is massively reliant balk. vanishingly few foreigners have ever made any real money selling to average Chinese people and China no doubt intends to keep it that way. My hunch is that sooner rather than later as China reckons with its banking and overbuilding crises, HNA will unload their shares - at a considerable loss. We say this movie in the 1980's when Japanese companies gorged on over-priced US assets until the Japanese economy imploded. Watch for the same with China with attendant political turmoil as well.
More cash in Hilton's pocket for them to invest and grow even faster.
Hopefully, HNA and HH will strike a deal for HU to fly HH elites to Hainan, where Hilton has some terrific resorts, like Hilton Sanya Resort & Spa in Yalong Bay, Hainan, where I spent 4 nights during my 2012 Year-end Asian Escapade(tm). There are also couple of DoubleTrees and two more hotels more inland for a total of 5 on the...
More cash in Hilton's pocket for them to invest and grow even faster.
Hopefully, HNA and HH will strike a deal for HU to fly HH elites to Hainan, where Hilton has some terrific resorts, like Hilton Sanya Resort & Spa in Yalong Bay, Hainan, where I spent 4 nights during my 2012 Year-end Asian Escapade(tm). There are also couple of DoubleTrees and two more hotels more inland for a total of 5 on the tiny Island. I would not be surprised if Hilton has simply been managed those properties for HNA Group.
Hainan has been dubbed "China's answer to Hawaii" -- coincidentally, they are almost exactly the same latitude!
What if they cut the rich bounty of perks that Hilton offers its top elites?
Oh wait...
HNA is much smarter with their hospitality investments than they have traditionally been with their airline investments. Adam Tan is an extremely sharp executive that I've worked with personally in the past and comments about "mainland mentality" are totally off the mark. HNA still has a long way to go, but they are making steady progress towards their goal of being a respected international conglomerate.
for this exact reason, i was immensely grateful Marriott fought hard in their bidding war to keep Starwood out of the hands of the mainlanders. Those SPG Plats had so much hatred of Marriott that they were willing to back the completely unknown entity (Anbang) with fantasies that SPG elite program would've been completely left untouched even post-merger, and more ironic since most of those online commenters don't even know how to pronounce "Anbang" correctly...
for this exact reason, i was immensely grateful Marriott fought hard in their bidding war to keep Starwood out of the hands of the mainlanders. Those SPG Plats had so much hatred of Marriott that they were willing to back the completely unknown entity (Anbang) with fantasies that SPG elite program would've been completely left untouched even post-merger, and more ironic since most of those online commenters don't even know how to pronounce "Anbang" correctly in Chinese.
no worries, there will never be negative changes in the industry of airlines and hotels, only the various kinds of enhancements, by now we are all very accustomed to.
All good till they don't like something about their deal or dividends and start suing Blacksone and Hilton
No worries though Hilton simply raises standard rooms to 500k per night without any advance notice and the legal fees are covered
I remember HNA actually stands for HaiNan Airlines. It was founded as Hainan airlines back in 1993.