Case Study | KCC Real Estate Development Company

China’s KCC chooses Australia for its first overseas hotel development

KCC’s decision to expand its hotel portfolio beyond its home market led the developer to Australia, where rising numbers of Chinese visitors signal growing demand for accommodation. Nearly 10 years ago, the chairman of China’s KCC Real Estate Development Company, Li Jie, made the bold decision to shift the group’s strategy from real estate to tourism infrastructure. The former Kunming Construction Company has since developed an impressive portfolio of resort properties in south-west China’s Yunnan province. It has partnered with US-based Hyatt Hotels, Singapore’s Banyan Tree Hotels and Resorts and Pullman, owned by French hotel group Accor. When the Australian Trade Commission (Austrade) and Tourism Australia began working to identify potential tourism infrastructure investors in China, they saw KCC as a standout thanks to its existing hotel investments. In fact, Mr Li was already considering offshore expansion when Austrade approached him about KCC’s potential investment in a hotel, resort or other tourism infrastructure opportunity in Australia. Bill Zhuang was the General Manager of KCC’s investment consulting firm, Evans & Peck (Kunming), at the time. “We were also looking at South-East Asia but the potential of Willow Creek was impossible to ignore,” says Mr Zhuang. Willow Creek Winery is an 18-hectare vineyard on the Mornington Peninsula in Victoria. Austrade and Tourism Victoria assisted Mr Li and Mr Zhuang with initial site inspections in early 2013, followed by detailed discussions with potential sellers.

KCC’s Willow Creek Vineyard spans 18 hectares.

“We believe Austrade can introduce real, qualified opportunities to our foreign investment plan.” Bill Zhuang, Chief Operating Officer, Cloud Investment Operations, the Australian investment division of KCC

On 18 July 2013, KCC’s Australian investment arm, Cloud Investment Operations, signed the sales contract to acquire Willow Creek Winery for A$9.5 million and paid a deposit to the vendor, Knowles Group. Three months later, KCC officially took ownership of Willow Creek, where it plans to invest a further A$10 million in developing a 39-room, upmarket boutique hotel which will add about 30 jobs to the region.

Mr Zhuang is now the Chief Operating Officer of Cloud and has moved to Melbourne where KCC’s Australian business is headquartered. Meanwhile, Mr Li’s son has taken up studies in Australia.

Pullman Lijiang, in an area of Yunnan province known for its spectacular beauty and perfect climate. “It’s our best business,” Mr Zhuang says of Pullman Lijiang, adding the occupancy rate is always above 90 per cent. Can KCC replicate this success at Willow Creek?

The gift of wine

“We hope so,” Mr Zhuang says cheerfully. “We’re targeting the same type of clients.”

Willow Creek’s 20-year-old vines provide KCC with trade opportunities even as the company negotiates with architects, planners and management groups ahead of breaking ground on its hotel development.

KCC seizes opportunity

Willow Creek produces mainly pinot noir and chardonnay. Mr Zhuang says KCC has high hopes for China, where rising incomes and health concerns over traditional high-alcohol spirits have lifted wine consumption. “The market has boomed,” he says. In the year to September 2013, China and Hong Kong led growth in Australian bottled wine exports priced above A$10 per litre, according to Australian Government agency Wine Australia. Mr Zhuang says most of the red wine consumed in China is shiraz or cabernet sauvignon. “For a new variety like pinot noir, we have a chance to take the market.”

Rising numbers of visitors from China have underscored opportunities for Chinese investment in Australia’s tourism infrastructure, and KCC’s previous relationship with Austrade meant it had an existing partner in this important process. Ties between KCC and Austrade go as far back as 2001 when Austrade introduced an Australian firm, PTW Architects, to KCC for its Lakeside Dreams residential development in China. KCC selected PTW as the project’s master planner. Mr Zhuang says KCC expects to invest further in Australia’s tourism infrastructure sector. “We believe Austrade can introduce real, qualified opportunities to our foreign investment plan,” he says.

KCC’s presence in China will enable it to tap the corporate gift market as a first step, Mr Zhuang says.

About Austrade

“Chinese companies give gifts to their staff and clients two or three times a year,” he says, citing Lunar New Year, the Spring Festival and, in autumn, the Moon Festival.

The Australian Trade Commission – Austrade – is the Australian Government’s agency for the promotion of trade, investment and education and for the development of tourism policy, programs and research.

“Willow Creek wine is a good gift option for them.”

Through a global network of offices, Austrade assists Australian companies to grow their international business, attracts productive foreign direct investment into Australia and promotes Australia’s education sector internationally. Austrade also works on a range of tourism policy, programs and research to strengthen Australia's tourism industry and grow Australia's tourism market share.

Best hotel in the portfolio KCC’s plans for a high-end boutique hotel at Willow Creek are so far progressing smoothly. “The previous owners completed the council and regional approvals process, and we already have our design concept in place,” Mr Zhuang says of the project. According to the concept, the hotel will exude a rustic ambience enhancing Willow Creek’s winery and other existing facilities, as well as the breathtaking landscape. When the hotel opens in 2015, it will be the seventh in KCC’s portfolio. So far, the jewel in KCC’s crown is the

DISCLAIMER Whereas every effort has been made to ensure the information given in this document is accurate. The Australian Trade Commission (Austrade) does not provide warranty or accept liability for any loss arising from reliance on such information. ©Commonwealth of Australia 2013

For more information email [email protected] or visit www.austrade.gov.au

China's KCC chooses Australia for its first overseas hotel ... - Austrade

For more information email [email protected] or visit www.austrade.gov.au. Mr Zhuang is ... “Willow Creek wine is a good gift option for them.” Best hotel in ...

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