The number 168 is often popular with the Chinese as its translation sounds like ‘prosperity all the way’. Coincidentally, this figure with its auspicious connotations is the sum of two recent investment deals in the resilient China domestic consumption sectors, which might indeed prove lucky for Actis – a UK private equity investor in emerging markets.
Actis, co-investing with Warburg Pincus, had a week ago announced a US$65 million investment in China’s 7 Days Inn Group. In September last year, Merrill Lynch, Deutsche Bank and Warburg Pincus had injected second round funding of $95 million in the Shenzhen-based company, which is the 5th largest budget hotel chain in China. Warburg made its first $10 million investment in 2006.
The top 3 leading operators Home Inns, Motel168 and Jinjiang Inns combined make up an estimated 44% of China’s economy hotel market. The dominance of domestic brands has driven private investment in local firms as an avenue for foreign investors to board the rapidly expanding Chinese-traveller bandwagon. Domestic tourism generated US$781.9 billion last year, nearly 20 times the revenue of 2000.
The 2008 Survey Report on China’s Economy Hotels by the China Hotel Association found that the number of new budget hotels opened by its top ten enterprises surged 125% last year to reach 1080 economy hotels with 135,896 rooms, up 123% compared with the previous year.
China’s bustling economy lodging sector has grown from 166 budget inns in 2004 to 1,689 by 2007. Average occupancy rate stood at 82% against the average 60% rate of star-rated hotels over the same period.
In addition, leading China education services company Ambow Education Group has also secured US$103 million investment led by new investor Actis and existing investors Avenue and Macquarie Group.
This is the second time that the Beijing-based education company has broken the record for a single round of private placement in China’s education sector. In October 2007, Ambow raised $54 million venture capital from Avenue, CID Capital, Cisco Systems and Macquarie Group. Ambow received its first round investment of $10 million from JAFCO Investment, CID Capital and Cisco Systems in April 2006.
Founded in 2000 by founder and CEO Dr Jin Huang, Ambow specializes in e-learning technologies for China’s K-12 and vocational training sector and providing education services that complement the national curriculum.
China’s education market grew to an estimated US$143 billion in 2007 and is predicted to expand at a compound average growth rate (CAGR) of 12% to an estimated US$200 billion until the end of 2010, accordng to the Actis statement.
