Skift Take
Service exceeds geopolitical stress: Chinese business like Atour can generate more cash to expand back house by noting on the U.S. stock exchange rather than in China.
Cameron Sperance
Shanghai-based hotel business Atour may be working towards a massive debut on the New York Stock Exchange, but that doesn’t signal immediate prepare for American growth.
Atour, which owns brand names like ZHotel and A.T.House and has leveraged China’s taking off middle class, prepares to raise as much as $300 million as part of strategies to go public on the U.S. stock market, CNBC reported today. Its going public could value the company at as much as $2 billion.
The mid-sized Atour would sign up with Chinese hotel giant Huazhu on the American stock market. While analysts see numerous reasons for Chinese hotel companies to list in the U.S. over their home nation, quick expansion in the U.S. isn’t one of them.
“China still has lots of development chances for its domestic hotel business,” stated Nicolas Graf, associate dean at New York University’s Jonathan M. Tisch Center of Hospitality.
Double-digit development is still possible in China, so there is less of a need to look abroad for returns– particularly with many other business wanting to get into the marketplace. The CEOs of Hilton, IHG, and Marriott all indicated China as a crucial source of future development throughout very first quarter incomes calls over the last two weeks.
U.S. hotel development is still possible down the line, but Atour’s potential IPO likely has more to do with ease of access.
It’s easier to note on the New York Stock Exchange than the Chinese market, Graf included while pointing to billionaire financier Jack Ma’s failed IPO for his monetary innovation company Ant Group. Regulators pulled the IPO days prior to it was expected to start selling Hong Kong and Shanghai last year.
Regardless of swelling geopolitical tensions between the U.S. and China, noting in the U.S. gives a much easier exit for international financiers who may have initially backed Atour, Graf said.
“When you check out the news, it might seem like a wrong moment for a Chinese company to list their stock in the U.S. The risks, specifically for a hotel business not a lot in high tech, are balanced out by how much easier it is to list in the U.S. than it is in China,” he added. “Regulators in China are actually a lot more limiting on listings.”
Atour presently has more than 600 hotels throughout more than 170 Chinese cities, according to its website. The company has a more than 900-hotel development pipeline for its brands throughout a range of cost points.
“Listing in the U.S., one of the biggest and most liquid capital markets, supplies [Atour] with the required capital to broaden [back in China],” stated Peng Liu, a professor from Cornell University’s School of Hotel Administration.
Atour did not respond to Skift’s request for remark, but the company’s website points to China’s “new middle class” as a motorist for a lot of its brands. This is a rapidly growing earnings generator for hotel operators in the area.
More than 90 percent of the world’s middle-class population was discovered in Europe and North America in the 1950s, when Marriott opened its first hotel in Northern Virginia. Today, more than 20 percent of the international middle-class population is in China, according to the Brookings Institute. The think tank estimates 1.2 billion people in China will remain in the middle class by 2027.
“The Chinese traveler market is underserved,” Liu said.
U.S. consumers already have so much brand familiarity with the similarity Marriott, Hilton, and Hyatt that it is going to be hard for a business like Atour to enter that market, Liu included.
But the string of development partner deals a lot of these business have all checked in China points to where the world’s hotel building boom will likely center throughout the travel recovery. Hilton has an advancement agreement with residential or commercial property designer Nation Garden to build more than 1,000 House 2 Suites homes throughout the nation.
“Ever since they chose to rebalance the domestic economy towards more internal usage, domestic tourist has grown significantly and provided more opportunities for the domestic brands to grow,” Graf said. “I don’t see the Chinese firms growing worldwide in the very short-term. I believe it’s going to take a couple of more years of them constructing inside and getting more comfortable [about] investing abroad.”