I was asked on Quora, “How would YOU find a Chinese buyer for a luxury off market hotel in Rome?” Here is my answer.
Thanks for the question Robert! Selling a hotel to foreign buyers, in this case overseas Chinese investors, is a worthy endeavor.
For this example, I will assume this is the first time you are targeting Chinese investors and that you are not familiar with the market so we will start at the basics.
A. Country: Search for all large investments in your country. In this case Italy. So try something like “Chinese Investment Italy” You want to know everything you can know about Chinese investments, not only in your sector, but in any sector. Do plenty of Google searches with terms like I mentioned above. Then make a list of all Chinese investments in the country.
I started with a Google search and I found that ChemChina has invested $7 billion euros into Pirelli. Although Pirelli’s HQ is in Milano and you are in Rome, $7 billion euros is a significant investment and, in fact, the largest Chinese investment to date in the EU. So I would start sniffing around to see if you can meet any of the players in that deal. If you have friends at Pirelli, see if they know any of the top management from ChemChina. It would be very worthwhile to meet them and add them on WeChat even if they don’t end up investing in your hotel. They will very likely know a potential buyer who they could introduce in the future. Good chance to learn how they are thinking and what challenges they have come across in Italy. Networking with Chinese who have recently invested in Italy is a fantastic opportunity. You will learn what issues they are having. How they think about Italy. And how you can help them to get comfortable and perhaps to help them grow their network amongst your friends.
B. City: After learning about general investment in your country, you want to drill down on your city to see specifically who has invested so far and what they invested in. You also want to know if this was a successful investment and if so, why it was successful or unsuccessful.
Search “Chinese investors Rome, Italy” and “Chinese buy hotel Rome, Italy” You also want to know how your city ranks in attractiveness to Chinese investors and about any previous investments. I also searched “Italy top cities Chinese investors” and I got #1 Milan and #2 Rome. That is good. You’re in the second most attractive city for Chinese investment. That is excellent as the general pattern is that Chinese invest in ‘gateway cities” first and proceed from there.
Although ChemChina could be a great way to network, the next stage is to think about which types of buyers would buy your asset. In this case a hotel. In my experience, Chinese tour companies are the number one buyer of overseas hospitality businesses. The reason being is that Chinese companies like to “own the racecourse” ie own everything their clients touch from A-Z. So in other words, they want to own the office where they do the sales. They want to own the bus that takes clients to the airport. They want to own hotels where guests stay. They want to own the restaurant where their tour groups eat and finally, they want to take them shopping to stores that, you guessed it, that they own.
So you want to know who (which Chinese company or individual or sovereign wealth fund or insurance company) bought which hotel to date in Rome. My search for Chinese investors in Rome led me to The Chinese chain Rosewood Hotels and Resorts, (New World China Land) which purchased the massive building that used to host the Italian State mint in the Rome posh district of Parioli and is planning to turn it into an extra-luxury hotel.
Since this is in your city, you want to research this deal in more depth. I would recommend going down to the site to see who you can meet. Ask around. Use WeChat’s function “look around” when you are on site to see if you can find some Chinese managers in the area. Add them on WeChat and start chatting. Again, you want to know as much as you can about any previous investments in Rome and where they went right and where they went wrong. Simply knowing what went wrong on someone else’s deal can be crucial to the success or failure of your deal too.
So your next course of action is to find out which Chinese tour companies are operating in Italy. When you see buses of Chinese tourists, you need to talk to the tour guides, drivers, take pictures of the buses themselves and write down any company names on the buses and contact them later. These tours are the #1 target for someone selling a hotel to Chinese investors.
It is very likely that the Chinese tour company is either state owned or very large back in China. They have plenty of cash and as I said before, they don’t like giving other people money. In this case, sending their guests to hotels they don’t own. Also, they are not fond of their tour groups eating and spending money at restaurants that they don’t own. Same goes for buying souvenirs. They detest seeing their guests buying souvenirs at hotels they send guest too. I hope you’re getting the picture.
You want to find out the name of the tour companies themselves and also where the big Chinese tours in Rome are putting tour groups. If you find that they are have a shortage of rooms for guests, it can be a very easy sale indeed. Of course it’s all about timing, hard work and luck. But if you target the right type of buyers (and that will depend on the type of asset you are selling) and you network with Chinese who made previous large investments in your area, you are well on your way.
Of course not every hotel fits with every tour company. Some tour companies are cut rate and looking for the cheapest possible accommodation while others are luxury and looking for unique experiences. But you will sharpen the saw as you move forward.
Once you find a company that is in the right position to buy, you should contact their head office. Let them know that you are aware of their current difficulties in Rome finding guest accommodations and that you might have a good solution for them.
It’s a common fallacy that selling large assets to Chinese investors is difficult and that you can’t do it without a Chinese agent. I have not found that to be the case. In fact I’ve found the opposite. Once you find the right Chinese buyer in the right situation, a deal can go very quickly and smoothly.
The key is researching in advance and then finding the decision maker inside of a Chinese State Owned Corporation investing in overseas properties. And you don’t necessarily have to go to China to present the investment opportunity. If the company is already setup in Italy and is making money from tours, they will have a person with sufficient authority to get the ball rolling or even able to make the final decision.
And never forget to add everyone to your WeChat as you go along the way. Many of the tourists staying at your hotel will also be interested in investing in Rome either now or in the future. My research has shown that 86% of Chinese buyers started as tourists. So meeting, adding to WeChat, networking with tourists on your journey could end up to be future potential business partners for this or other ventures. Please leave comments and questions below and I’ll be happy to elaborate or answer anything that isn’t clear. Thanks for reading.
If you are interested in selling large institutional grade assets to Chinese real estate investors, join the course and work with me directly. Here’s how to get started.