NH moves into China searching for growth

China's HNA Group and Spain's company NH Hoteles announced the set up in 2012 of a hotel management company in China. HNA will inject €330 million into the Spanish company by December 15, according to the terms of the deal. The joint venture signals NH's use a growth strategy through low-risk deals, such as management of third-party owned hotels, to expand its business.

Spain's NH Hoteles (see graphic with key financials) ranks third among European business hotels. It operates 400 hotels with around 60,000 rooms in 25 countries, with a strong presence in Europe: 36% of the rooms portfolio located in Spain, 18% in Germany, 14% in Italy and 11% in The Netherlands among others, as well as in America and Africa. Madrid-listed NH Hoteles has at present 22 new projects for hotels under construction.

HNA Group is the sixth company in the ranking of China's top 500 private companies, and operates in a wide variety of sectors, from airline travel, to logistics, to financial services and real estate. In 2010, the Group achieved revenues of €7.0 billion, and currently owns €40 billion in assets with more than 80,000 employees.

The contract is part of a plan agreed last May between both firms, which will let HNA access the European market under the NH umbrella while the Spanish company will expand in China. NH believes that

“By entering China, we will in time be able to increase our turnover, diversify revenues and benefit from the excellent opportunity involved in taking a major position in the four-star hotel sector, as demand for business travel increases in the country. This demand is driven by higher disposable incomes and the Chinese Government's policies aimed at boosting domestic consumption.”

According to the World Tourism Organisation, China will be the country in the world most visited by tourists by 2020. More than sixty cities in China currently have populations of more than one million inhabitants compared to Europe with thirty-five.

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About the Author

Victor Jimenez
London contributor at thecorner.eu, reporting about the City and the Eurozone economies. He regularly writes for Spanish newspaper group Prensa Ibérica--some of his features include shared work with journalists of The Daily Telegraph and the BBC.