[photopress:Brian_Chinappi.JPG,full,alignright]RReef, the property investment arm of Deutsche Bank has said it plans to develop at least 25 hotels in China at a cost of $550 million, along with private equity partner H&Q Asia Pacific.
The partners in the 50-50 joint venture said they planned to acquire at least 15 sites in the next three years.
Brian Chinappi, managing director at RReef and seen here, said, ‘We find there’s a niche. There’s a lot of talk of all these hotels being built in China, but only 10% are internationally branded.’
The planned hotels, which will cater largely to business travelers, will be managed under the mid-range Hilton Garden Inn brand, part of Hilton Hotels.
The Chinese hotel market, worth around $15 billion in annual gross revenue, is growing at an annual rate of about 15%. That growth is mostly fuelled by domestic travel. However, the number of foreign visitors to China was also increasing at around 16% with most on a business trip.
Brian Chinappi said that building five-star hotels made little investment sense. ‘The situation with land prices and room rates, means that it’s very hard to make those investments work.’ So RReef is going for the middle sector which is Hilton Garden Inn.
Koos Klein, Hilton’s Asia-Pacific president, speaking about this deal at the Reuter’s conference, made a remark which may come back to haunt him. He said, ‘There are plenty of unbranded hotels in China, where you might want to sleep next to the bed rather than in it.’
He added that the partnership between RReef and H&Q would allow Hilton Garden Inn to popularize its brand in just a couple of years.