With the continuous decline in the economy, a new wave of luxury hotels in China is set to change hands. In recent days, there have been cases of luxury hotels being transferred or auctioned off in various locations.
According to a report by “Yicai Finance”, luxury hotels in Jiangsu, Hunan, Hainan, and other regions are facing transfers or auctions. Some are in need of cash due to the owners’ debt issues, while others are facing overall foreclosure due to the bankruptcy liquidation of the parent companies.
In the Beijing market, there are quite a few hotels listed for trading, but the Sofitel Beijing Central holds a unique position. Located just four kilometers from Tiananmen Square and the Forbidden City, the Sofitel Beijing Central is situated in the heart of the city. Despite its rich history and multiple changes in ownership, this luxury hotel has recently been put up for sale.
Market sources indicate that the Sofitel Beijing Central Hotel was recently listed for sale with a price tag of 2.8 billion yuan (RMB). The reason for the sale is that the ownership entity, Tianfu Rongde Hotel (Beijing) Co., Ltd. Jianguomen Branch, is facing debt issues and plans to solve them by transferring the hotel.
Not only in Beijing, but in recent days, there have been reports of luxury hotels being transferred or foreclosed on in various locations. According to information from Alibaba Asset Auction Network, assets belonging to Chongqing Baichun Industrial Co., Ltd. located in Beibei District, Chengjiang Town, will be auctioned off starting September 2 with a starting bid of 700 million yuan.
Apart from the operational pressures faced by the hotels themselves, the financial situations of the investment entities are also major factors leading to the sale of high-end hotel assets such as the Banyan Tree.
According to the Chongqing Bankruptcy Court, Chongqing Baichun Industrial Co., Ltd. will undergo a public foreclosure of the Banyan Tree assets in early September due to bankruptcy liquidation.
In fact, as early as last year, several major cities experienced transactions involving high-end hotels. For instance, in December last year, Tianjin’s The Ritz-Carlton Hotel, Sanya’s InterContinental Hotel, and Guanghegu Hot Spring were successfully sold off as distressed asset packages with a total transaction price of 2 billion yuan.
Additionally, last year, hotels like The Bulgari Hotel Shanghai, The St. Regis Hotel Sanya, The Fairmont Nanjing, The Westin Chongqing Liberation Monument, and The Westin Beijing Chaoyang were either put up for sale or successfully sold.
Why did the trend of selling luxury hotels emerge in 2023? From the backgrounds of the original owners, many hotel owners in recent years have faced tight financial situations or debt crises, prompting the need to sell off some major projects for liquidity.
For example, the original owner of The St. Regis Shanghai in Hongkou, Shanghai Guo Zhijie Investment Development Co., Ltd., was a controlling shareholder of Anxin Trust. Since 2018, Anxin Trust has seen significant losses, leading to Guo Zhijie Investment Development Co., Ltd. gradually getting ensnared in a debt quagmire.
The real controlling entity behind three hotels including The Ritz-Carlton Tianjin is the Tianfang Group from Tianjin, which includes Tianfang Commerce (Tianjin) Co., Ltd., Tianjin Tianfang Construction Engineering Co., Ltd., and Tianjin Fangxin Building Materials Technology Co., Ltd. In 2018, Tianfang Group’s total debt exceeded one trillion yuan, and since 2020, the group has experienced multiple bond default incidents, leading to being listed as a person subject to enforcement for dishonesty, with restrictions on high consumption. Sell-offs from the developer of The Bulgari Hotel Shanghai, Huakuai City, resulted in a net loss of 10.9 billion yuan in 2022, with the latest financial data showing a further loss of 2.04 billion yuan in the third quarter of 2023.
Wanda also initiated a “sell-off” mode in 2023 due to tight liquidity, selling off not only the aforementioned luxury hotels but also several Wanda Plazas. In mid-December 2023, Wanda received assistance from Taiping Alliance Investment, resolving the repurchase pressure from the failed gambling agreement and greatly easing the liquidity crisis. Nevertheless, continuing to sell off major assets, developing light assets, and exporting brands will still be the path Wanda needs to take in the future.