Vienna Hotel Group is planning to conduct a Series C financing round this year to raise at least RMB1 billion (approx:US$160 million) that will establish it as China’s top mid-range hotel group and pave the way for an IPO in 2017.
The long road to IPO
Vienna Hotels was established by CEO Deman Huang in 1993 and has been steadily adding two hotels per year from 1999 to 2006. He has steadfastly kept Vienna Hotels in the mid-range category despite the onslaught of budget class hotels slicing into the segment since 2006.
Vienna Hotels received US$15 million from Softbank (SAIF) in exchange for a 23% equity transfer in a Series A financing round in 2007, and an additional US$20 million investment from private US fund Mount Kellett in 2010.
The hotel group’s growth pace accelerated after the financing round in 2010, opening 60 to 80 hotels a year, or more than 30 times that of the period of 1999-2006. While its overall occupancy rate slid from the 100%-120% level to 94% due to the global economic crisis, its IPO ambition has not been dampened.
“As part of the traditional hotel industry, if we don’t have big enough scale to connect with the equity market after going public, our share price might fall below the issue price and that is not what we want at all,” Mr. Huang explained, adding that the company would consider a third round of financing through strategic cooperation with real estate developers in order to enlarge its scale quickly.
Rapid asset expansion to drive up share value
To counter the rapid encroachment of budget hotel giants China Lodging, Home Inns and Plateno Hotels into the mid-range hotel segment, Vienna Hotels signed a strategic partnership deal with Procter and Gamble (P&G) on February 6. The deal enables Vienna Hotels to directly purchase P&G products, links up the two companies’ loyalty programs and resources sharing.
According to its official website, Vienna Hotels now has 400 hotels with 60,000 rooms. It would have to add 200 hotels per year to realize Mr. Huang’s plan of having“1,000 hotels in 100 cities” before 2017.
In contrast to the budget hotel giants, Vienna Hotels plans to make a domestic A share IPO in 2017 instead of going for a Nasdaq listing. “The Shenzhen Stock Exchange has been very supportive of SMEs with original business models like ours and we see more future growth potential in the domestic capital market,” Mr. Huang said. “Also, access to TV and internet media for branding is relatively convenient and listing maintenance cost is relatively lower.” (Translation by David)
