Fosun International (0656) is to spin off and separately list its tourism arm, Fosun Tourism Group. It is expected to raise US$700 million (HK$5.49 billion) in Hong Kong.
Having started operations as a business commerce department at Fosun International in 2009, Fosun Tourism acquired the controlling interest of French resorts operator Club Med, in 2015. Club Med is a family-focus high-end travel provider founded in 1950. It operates 69 leisure resorts in 26 countries and regions as of June 30. These resorts are spread out in locations such as the French Alps, Bali in Indonesia and Guilin in China. It also has operations in 40-plus countries.
For the year ended December 31, 2017, 49.3 percent of the resort operator's revenue came from customers from Europe, the Middle East and Africa, while 22.3 percent was from American clients. The rest was from Asia Pacific. It served 4.6 million people from February 2016 to June 2018.
After the Club Med deal, Fosun Tourism made a minority investment, taking a 5 percent stake in UK travel group, Thomas Cook. As of June 30, the company owns 6.04 percent of Thomas Cook, according to its prospectus.
Fosun Tourism develops, operates and manages destinations including Atlantis Sanya, which was launched at the beginning of this year. The resort, developed at a cost of US$1.6 billion, has attracted over 1.3 million customers. There are projects in Lijiang and Taicang cities under design as well.
The company also provides services and solutions in tourism and leisure settings, such as learning and playing club for children at tourism locations and the Foliday platform which focuses on families tourism solutions.
Fosun Tourism is the world's largest leisure tourism resorts group in terms of revenue in 2017, research house Frost & Sullivan says.
The spinoff had revenues of 8.9 billion yuan (HK$10.19 billion), 10.78 billion yuan and 11.80 billion yuan for the years ended December 31, 2015, 2016 and 2017. It is notable that over 99 percent of its annual revenue came from its resort business.
Fosun Tourism did not book profit in those three years. But losses narrowed - 551.61 million yuan loss in 2015, 196.30 million yuan loss in 2016 and 33.27 million yuan loss in 2017.
For the six months ended June 30, 2018, Fosun Tourism returned to profit, reporting 133.92 million yuan net income. During the first half, the resorts' contribution to revenue also fell to 95.5 percent.
The industry has room for growth.
The global average per capita tourism expenditure is expected to increase to US$1,025.1 in 2022 with a compound annual growth rate of 6.7 percent from 2017 mainly due to rise in disposable income, according to World Travel and Tourism Council. At the same time, the tourism expenditure per head in China would grow at a CAGR of 10.8 percent from 2017 to 2022.
"Global tourism, especially China's tourism, is at a tipping point - from sightseeing to leisure travel. And Chinese are focusing on family trips," Guo Guangchang, the chairman of Fosun International, has reportedly said. Leisure tourism is the company's main focus.
Driven by increasing spending on tourism, preference for tourism services and experiences including family-oriented tourism went up, F&S says, adding that "the China leisure tourism market, particularly family-focused leisure tourism activities, is poised to grow significantly over the next few years."
It forecasts that the leisure tourism in the country would increase to 4.55 trillion yuan in 2022 with a CAGR of 12.8 percent from 2017. Before that, it had a CAGR of 15.8 percent from 2013 to 2017.
According to the prospectus, Fosun Tourism will use 20 percent of capital raised to expand its existing businesses, such as further developing the resort business and for digital technology infrastructure.
Meanwhile, 30 percent is earmarked for projects in Lijiang and Taicang cities and 25 percent is for potential investments and acquisitions. Another 15 percent will be used for repaying debts, while the rest goes for operations.
The spinoff was granted a HK$2 billion loan in June this year.