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Carlyle Group has developed a taste for the Chinese hotel industry and its investment pace in the sector this year is expected to remain solid. As the economy maintains its healthy course, more are investing in the hospitality industry. Carlyle Group has developed a taste for the Chinese hotel industry and its investment pace in the sector this year is expected to remain solid. The latest move by Carlyle, one of the world's largest private equity firms, was to complete a deal to take 7 Days Group Holdings Ltd private. The company, which was listed on the New York Stock Exchange, runs the 7 Days Inn budget hotel chain in China. In March, 7 Days Group said that Carlyle, Keystone Lodging Co Ltd and Sequoia Capital planned to acquire the company for $4.60 per ordinary share, or $13.80 per American Depositary Share.
In July, 7 Days Group, Carlyle and Sequoia Capital announced the establishment of the Plateno Hotels Group and said that the 7 Days Inn chain would become part of it. The Plateno Hotels Group will develop another four high-end and mid-tier hotel brands based on the 7 Days Inn's concept. "With the acceleration of the country's urbanization drive and an improvement in Chinese people's disposable income, customers will have more specific requirements and the coverage of high-end and economic hotels will have a bigger market space," Eric Zhang said, a managing director at Carlyle. Zhang said that the hotel sector has a close relationship with the country's economy. And as the Chinese economy remains on a healthy track, investing in the Chinese hotel industry has great potential. "The business risk pattern of the hotel sector is low, and brands, sites and resources are key factors of the sector and it's hard for competitors to copy them," he said. Zhang added that the relatively high valuation of the hotel sector is another reason behind Carlyle's confidence in the industry. "Although lots of budget hotels emerged and competition among them was fierce, the market is far from being saturated," said Zhang, adding that budget hotels are able to compete with guesthouses and two- and three-star hotels. Industry insiders said that Carlyle is taking part in the 7 Days Inn deal not because the valuation of the company was lower than its real value, but because Carlyle is confident on the company's growth prospects and sustainable profitability. Carlyle also took a controlling 49 percent stake in China's Mandarin Hotel Holdings Ltd in July last year, in a bid to tap into the country's emerging mid-tier hotel market. The value of the investment was not revealed, but a typical deal by the fund through which the investment was made, Carlyle Asia Partners III LP, which totals $2.55 billion, is usually worth more than $75 million. |
