【Record】Tourism Investment and Financing Conference

Now, let's give the floor to our fifth guest, Mr. Eddie Chen, Managing Director and Head of China & Asia, EURAZEO. You've been working in the U.S., Europe and the UN for more than 30 years. You're experienced in diplomacy, finance, investment and high-tech and have unique points of view. I'd like to ask you two questions. Firstly, what's the pandemic's influence on global tourism investment and cross-border mergers and acquisitions? Secondly, I've noticed that the fund under your guidance is jointly established by EURAZEO, the oldest fund management company in Europe, China Investment Corp and BNP Paribas. The fund has invested largely in medical and health care, which will affect the world medical tourism. Could you please share your suggestions on the future cross-boarder medical tourism investment and cooperation?

Eddie Chen: Thank you, Mr. Li. As for the first question, I notice that other guests have expounded from different perspectives. I have some special opinions.

There are some features from the perspective of cross-border mergers and acquisitions. Firstly, it's better to hold shares. Secondly, management after purchase is required to be strict. Thirdly, profits should be given priority to. Technically, projects drawing cross-boarder investment institutions won't be dodgy under normal circumstances. In 2019, cross-border mergers and acquisitions were prosperous in Asia, Europe and North America. For example, EURAZEO browsed through over 600 quality programs which were in the field of cross-border mergers and acquisitions. We carefully studied 70 to 80 programs which were from various industries. Programs from service industry included tourism, education, health care and high-tech. The point to answer the first question lies in investors' preferences. I'd like to share with you my first opinion.

From this perspective, we pay more attention to the upstream and downstream companies of industrial chains. We not only look into tourism, but also keep an eye on upstream and downstream industries. For example, we've acquired a hotel management school, two of the world's greatest brands, the world's second largest provider of tax reimbursement as I mentioned before. In addition, we have taken over the world's largest institution of study tours. As we all know, study tours bring tourists. This institution will provide services for 500 thousand students. A student has a parent at least, which means 500 thousand tourists. The parent might send his/her child to study abroad in the U.S., Europe or Central and South America. After that, the parent might start travelling. Therefore, we prefer professionals who have worked for various types of business or share the same principle with us that an institution can't work on tourism only for tourism's sake under normal circumstances.

COVID-19 has broken all rules, investment principles, companies' strategies to withdraw and manage net income. We have realized how to address challenges when facing special disasters. From this perspective, I don't worry about the pandemic's influence on cross-border investors for we focus on a project's long-term development. Normally, we'll withdraw our cash after 5 to 6 years. The epidemic might affect tourism in 1 to 3 years, but won't influence our views on the industry. However, we should cautiously study and handle its short-term development from the micro-level perspective. After all, we should come down to earth to earn our living. This is the major issue we are facing now.

In short, we will attach greater importance to industries that might be able to remain stable in the business cycle. In particular, investors are optimistic about health care and online service during the pandemic. The outbreak has prospered online service.

Secondly, investors pay more attention to a company's profitability and cash flow management no matter the company is large or small and no matter what phase it is in. Profitability and cash flow management are vital for a company if it tries to draw investors' attention, especially when the economy is balanced on a knife-edge.

Thirdly, I repeat that a company needs to extend its businesses to upstream and downstream industries, and adjust its businesses to attract investors. For example, does your company cooperate with upstream and downstream companies in the industry? Can you find a prominent partner? We can't require a tourism company to be omnipotent. The company should focus on some competitiveness. In addition, it should be able to connect other companies horizontally and comprehensively. Therefore, such tourism companies will draw investors.

As for the second question, I'd like to present my second opinion which might be slightly different from the question. Innovation is crucial. All industries, including tourism and investment, should be innovated. We have set up France-China Cooperation Fund in collaboration with China Sovereign Wealth Funds, China Investment Corporation and BNP Paribas. The fund was lunched last year and it began to invest in April this year. Managed by EURAZEO, this fund has 1 billion euros. It is a bilateral fund supported by countries, which is distinct from common funds. However, it applies market-oriented management, because it is managed by EURAZEO only. We invest in the high-end and outstanding hidden champions in Europe, but those companies should be able to enter the Chinese market. That means the companies should adapt their products to the Chinese market and empower China. The fund of 1 billion euros is the target, which is an innovative mode. The outbreak has impacted global trades. Some trades were cancelled or delisted, some vanished, others under negotiation ceased. However, we started investing in April. Until the end of July, we have invested in two programs. We acquired a Dutch provider of an ophthalmic surgical device who is the hidden champion in the industry. The device has an enormous market in China, but it was rarely seen in our country before. Therefore, we speed up to find the entrance to the Chinese market for the device, plan to sale it and set up an example in China. Ophthalmic surgery is a valuable industry. In addition, we acquired a French company specializing in automotive inspection and testing in July. As the provider of such services for the world's most important seven car enterprises, the French company is also the hidden champion in its industry. It has a history of 50 years. In 2020, France-China Cooperation Fund will complete two outstanding programs, which is an innovated mode. China's rigid demand still exists, while Europe has fine technology or products. We can combine supply with demand. Our capital market and investors will play a leading role. At the end, it will pay off and leave a sound market for the program we have invested in when we withdraw in the future.

Tourism has been shattered. Those companies which can't hold on will go bankruptcy. After the economy recovers in the next year, a bunch of new enterprises will emerge. How do investment institutions view those new tourism companies? In conclusion, we should pay attention to their ability of innovating forms of business in tourism. We shouldn't ignore new types of business. Moreover, those new types can offer new products, such as tourism in combination with mid- and high-end business travelers. For example, we acquired a hotel management company a few years ago. The company owned more than 100 asset heavy hotels in developed countries in Europe. We transformed them into boutique hotels which provided services for mid- and high-end business travelers. The group is prosperous this year, because other four-star or five-star hotels targeting ordinary tourists have been hit hard by COVID-19. However, business travelers should go on business trips and have meetings if possible. "Tourism plus Business Travelers" is a new mode. Tourism can be in combination with education. As I've mentioned institutions providing study tour services before, study tours will bring tourists. Children study abroad, while parents go on trips. We should break rules. Tourism professionals need to seek for innovative product planning horizontally in the industrial chains and produce such products. I'm convinced that companies, which are preferred by the capital market and can attract investment, have such abilities. Last but not least, such companies should structuralize their capital, form full structures, enter the capital market quickly, receive financing as soon as possible, and avoid becoming enterprises which conduct simple behaviors. That's all. Thank you!

Li Weiqun: Thank you, Mr. Chen. Our guests have presented their views on tourism investment from different perspectives. One of these five distinguished guests comes from a permanent neutralized state with gorgeous landscapes in Central Asia, Ambassador of the Republic of Turkmenistan to China. A permanent neutralized state creates a peaceful, safe and inclusive environment for tourists. I hope everyone could keep an eye on Turkmenistan's future opportunities and chances of investment.

Our second guest is Mr. Zhang, King of Characteristic Towns. He shared unique suggestions and success stories on building popular tourist destinations.

The third guest Mr. Na, Director-General of Hebei Provincial Department of Culture & Touris, comes from a province which is acclaimed in tourism. Hebei is extensive with various landforms, rich culture and tourism resources and a long history. I hope tourism investors would pay more attention to this wonderland. I also expect that we'll exchange our views and cooperate with each other.

Our fourth guest is the managing partner of Tourism Capital. He specializes in tourism investment, mergers and acquisitions at home and abroad. The guest presented his experience on the front line and professional judgement.

The fifth guest comes from France, specializing in investment, mergers and acquisitions. Our five guests come from Europe and Asia. Their work covers tourist destinations, mergers, acquisitions and integration. One of them works for the local government of a province famous for tourism in China.

As time goes by, the forum comes to an end. I'd like to extend my heartfelt thanks to our guests for their impressive speeches and discussions. We're convinced that tourism investors will attach great importance to the new trend and changes of supply and demand in tourism under our guests' guidance in the post-pandemic era. We will step on the new path towards future tourism investment. We sincerely hope that the pandemic would end soon, the world tourism would recover as soon as possible, and tourism investors could accurately judge the pandemic's influence and grasp opportunities to reopen the industry. I hope global tourism will regain prosperity. Tourism brings us a better life. Thank you.

Next, we'll move on to Tourism Investment Workshop in 5 minutes. Dear investment managers and representatives of project proponents, please take a break and come back on time.

Zou Feng: Distinguished guests, I'm Zou Feng, Moderator of Tourism Investment Workshop, Secretary-General of WTCF Investment Committee and Managing Partner of Tourism Capital. Welcome to attend the workshop. Each round of the workshop will last 6 minutes. Representatives of project proponents should negotiate according to the sequence list. I'll ring the bell every 6 minutes to remind you to swap seats.

Zou Feng: Tourism Investment and Financing Conference comes to an end. Thank you for attending the conference. Thank you!