The private accommodation and real estate market in China and Asia just got a whole lot more interesting with the latest move by Singapore-based CapitaLand to invest in and form a joint venture with Tujia.com, Beijing-based apartment sharing site.
CapitaLand is one of Asia’s largest real estate companies and owns Ascott International, which has grown to be the world’s largest international serviced residence owner-operator. It has over 26,000 operating serviced residence units in key cities of the Americas, Asia Pacific, Europe and the Gulf region, as well as about 15,000 units which are under development, making a total of more than 41,000 units in over 200 properties.
Ascott Heng Shan Shanghai: The partnership will help it expand faster in China.
In tandem, CapitaLand is setting up a Technology Council calling on high-calibre digital visionaries to use IT to drive its real estate business. On the council are notable venture capitalists Foo Jixun, Managing Partner of GGV Capital and David Su, Managing Partner of Matrix Partners China, both of whom have strong tech focus and a keen eye for the next tech game-changers; as well as Gabriel Lim, CEO of the Media Development Authority of Singapore.
Lim Ming Yan: The opportunity to expand into a new vertical.
Lim Ming Yan, President & Group CEO of CapitaLand Limited, said the company’s technology drive is to sharpen its focus to develop real estate of the future – “integrated and interconnected smart communities through smart buildings as well as seamless online and offline customer experiences”.
The council, which will identify tech trends, challenges and opportunities, will also offer advice and guidance on its investment and involvement in Tujia.com International, dubbed as the Chinese Airbnb. This, Lim said, would give CapitaLand the opportunity to expand into a new vertical which will augment Ascott’s core strength.
Ascott is leading a consortium to invest S$67.69 million (US$50 million) in Tujia. Ascott will also form a joint venture with Tujia with an initial capital of S$54.15 million (US$40 million). This joint venture led by Ascott will operate and franchise serviced apartments in China. It will also provide Ascott with a pipeline of apartments units to expand its portfolio in China where it targets to achieve 20,000 units by 2020.
A related article in Wall Street Journal said that Tujia had raised a total of $300 million, valuing it at US$1 billion.
Although a fraction of the $25.5 billion raised by Airbnb, this partnership between Ascott and Tujia should be watched as it brings together unique complementary strengths of two very different companies but with a common objective, that of scaling and blending the old world with the new world – a model that seems to have worked with Tujia’s approach in China of blending property management with an online marketplace.
Tujia features more than 310,000 apartments covering 388 travel destinations across China as well as overseas destinations such as Bangkok, Singapore and Tokyo for Chinese outbound travellers. Besides its online capabilities, Tujia operates some apartments for owners for a fee and franchises its business to third-party operators.
This partnership will enable Tujia to scale faster overseas and Ascott to take advantage of the Chinese company’s digital know-how and distribution. The challenge is, as with any partnership, is if two different corporate cultures can work well together?
Tujia, valued at US$1 billion, with the latest round.
Lee Chee Koon, Ascott’s CEO, who has been appointed to the board of directors of Tujia, said: “China’s lengthening list of billion-dollar technology startups is an indication of investors’ confidence in the country’s booming internet sector, including O2O (both Offline- to-Online and Online-to-Offline) commerce.
“The growth of mobile internet connectivity via devices like smart phones and tablets has enabled O2O commerce to thrive and establish itself as a mainstream market at an exponential rate, especially in China where the size of the market is considerably greater than just physical transactions.
“By investing in Tujia, a frontrunner in the online apartment sharing platform, Ascott is now well positioned to benefit from this growth.”
Ascott has a target of 80,000 units by 2020. It plans to make its three brands of serviced residences – Ascott, Citadines and Somerset – available on Tujia’s website for booking.
“Through Ascott’s joint venture with Tujia, we will be able to quickly scale up our presence in China to 20,000 units by 2020. With the rapid increase in Chinese travellers overseas and Ascott’s presence in many of the tourist and business cities worldwide, our penetration of the Chinese market through our partnership with Tujia is also expected to contribute to Ascott’s business globally.”
As part of its joint venture with Tujia, Ascott will operate serviced apartments located within the key growth cities of China using a new brand. This will include newly sourced properties and Tujia’s serviced apartments in China that are deemed suitable for conversion. Ascott is the largest international serviced residence owner-operator in China with over 14,000 apartment units in 77 properties across 24 cities.
Justin Luo Jun, Co-founder and CEO of Tujia, said he expected to have more than 400,000 apartments to be listed on Tujia’s website by the end of this year. “Our collaboration with Ascott will allow us to tap on Ascott’s expertise to offer more world-class serviced apartments and strengthen Tujia’s position as the leading online apartment sharing platform in China.”
Note: Both Ascott and Tujia will be speaking at the WIT Conference, Oct 19-21. See programme here
