Chinese capital continues its entry into the European hotel-ownership landscape, spurred by rises in outbound Chinese travelers and returns on investment in China being increasingly squeezed.

On 10 August, Chinese firm HK CTS Metropark Hotels Company Limited bought Kew Green Hotels, InterContinental Hotels Group’s largest hotel-management partner in the United Kingdom. It is the company’s first foray into Europe, and the largest single U.K. buy by Chinese capital in terms of price and hotel properties.

In translated comments sent to Hotel News Now, Elton Sunwu, GM of HK CTS Metropark Hotels, said the deal—reputedly for £400 million ($619 million)—was the first step in his company’s strategic objective of “building the brands with international standards.”

“The acquisition of Kew Green is … going to help us step forward to that goal, a strategy that sees us move onto the international stage,” Sunwu said.

HK CTS Metropark’s parent company is China National Travel Service Group of Hong Kong, whose hotel interests include luxury brand Grand Metropark Hotels and budget brands Traveler Inn and Traveler Inn Express.

According to Paul Johnson, Kew Green’s CEO, previous owners Goldman Sachs and Texas Pacific Group, which acquired the controlling stake in 2013, never intended being long-term holders.

In an email to HNN, Johnson said, “Goldman Sachs and Texas Pacific Group … provided Kew Green with substantial capital to acquire branded hotels. … The plan was always to exit.”

Acquisitions will continue, Johnson said.

“HK CTS have a relationship with (InterContinental Hotels Group) in China. They are looking to expand the number of branded hotels in the European market,” Johnson added.

Kew Green mostly owns its portfolio, but also in the mix are management contracts.

Chinese money will continue growing in Europe, sources said. The Kew Green deal underlines pressures recently subjected on the Chinese economy.

“Oversupply is quite severe in China, (with) the asset investment return relatively low and less stable compared with international markets. The acquisition of Kew Green is an effective way to optimize our assets, improve the ability to resist risk and increase the value of assets by attaining strongly performing overseas properties,” Sunwu said.

Giles Furze, director of hotel valuation at business consultancy Savills, agreed Chinese companies are looking to spread risk across the cycle. Buying European companies with proven footprints is an obvious play.

Furze said the international hotel sector is attractive to Chinese money due to the volatility of its domestic stock market and government measures to curb capital outflow into some other sectors.

“Chinese capital will accelerate. It’s a trend that’s been gathering momentum for the last 24 months, with no signs of slowing,” Furze said.

Sunwu methodically listed Kew Green’s attractive attributes.

“Kew Green ranked as the (No. 2) third-party hotel-management company in 2015 (in the U.K.) and 10th on the international hotel-management company list. It is the biggest operator of the Holiday Inn brand in Europe. Kew Green is very well known and has strong management strength,” Sunwu said.

“The acquisition is also about the buy of the whole management platform, team and brand. We will learn from each other … to improve our abilities and try to achieve the goal … in a faster way,” Sunwu said.

Sunwu hinted at capital’s struggle to be placed.

“The competition this time is fierce … (with) world-class competitors as (hotel-management firm) Redefine|BDL (and investment firms) KKR, FICO (Group) and DUET (Group),” Sunwu said.

It is business as usual for Kew Green, perhaps with tweaks nodding to the future.

“There is no intention to change the brands Kew Green operates,” Johnson said. “We are excited to have CTS as new investors. Chinese tourism is growing rapidly, and they are the largest travel agent in China, which should allow us to gain more market share of that inbound business. They are also supportive of management’s desire to continue to grow through acquisitions and securing more management contracts with third-party owners.”

Sunwu believes that as customers of his parent company’s travel agency increasingly travel they will be plugged into Kew Greens’ wide and expanding roster of hotels.

“Kew Green is a great supplement for us on the midscale level concerning brand, business model and management experience. … We will take Kew Green as a starting point to develop further in Europe and the rest of the world. And China is a potential market, too, for Kew Green,” Sunwu said.

“The acquisition of Kew Green is an important move to improve our locations … and meet the need of Chinese outbound tourists in a better way,” Sunwu said. “We will add more Chinese elements to these hotels, too, to get (Chinese travelers) familiar with international markets.”

Savills’ Furze said such slight repositioning paralleled Chinese-centric changes stemming from the management takeover of five U.K. properties formerly under the Ramada Encore flag now in the portfolio of Pentahotels, owned by Hong Kong’s Rosewood Hotel Group, and talk from China’s Wanda Group about debuting its own brand in developments in Madrid and London.

“My gut feeling is that Chinese brands will come, probably under a franchise model,” Furze added.

Presently, Chinese capital appeared most happy forging links, safeguarding capital and boosting leverage.

Sunwu said his company recently gained experience in asset restructuring and international mergers and acquisitions.

“We will further overseas expansion and consider any management company, individual hotel or asset portfolio as long as it meets our strategic requirement on performance, potential, brand, market scale, management and systems construction,” he said.

“We will keep running Kew Green Hotel and then further adjust and optimize the assets in it … to make (it) a more powerful platform with stronger development ability,” Sunwu added.

Furze pointed to one road block in the seemingly unstoppable entry of Chinese money: “Much focuses on continued discussions on the Schengen Agreement in relation to visas.”