Riding the wave of China’s growing hospitality market
China’s rapidly growing affluent middle- and upper-classes is seeing a surge in luxury resorts in China. Justin Downes looks at the opportunities this is creating in a range of sectors.
For those of us who have been living in China for some time, we can clearly remember and lament the days when comforts of home were ‘just that much harder to come by.’
Nowadays, especially for those living in China’s first-tier cities (such as Beijing and Shanghai), we don’t have the same things to complain about. The rapid growth of wealth and foreign interest in China has fuelled a frenetic pace of development of Western-Influenced and globally leading businesses focused on providing all of us with a multitude of options in which to spend our pleasure time and our leisure dollars.
We would be kidding ourselves if we thought that the expat or tourist population was fuelling and sustaining this growth…what is obvious is that the Chinese consumer has embraced the culture and quality that we have become accustomed to, and are now demanding the very best that industry has to offer. China’s countryman are now better travelled and better informed than ever before and are expecting nothing but the best of imported brands, talents and experiences.
The growth in the industry has reached far and wide and covers almost every aspect imaginable – from ski, golf and tourism resorts, to hotels, restaurants, yacht clubs, night clubs, winery’s, transportation, training and recruitment – and the entire supply chain, from top to tail. This growing appetite obviously opens the door to not only investors, but consultants, specialists, management – and pretty much anyone else that understands the concept of good quality and professional hospitality.
While China certainly has the ability to define and grow its own industry, there is still plenty of room for foreign firms and individuals to contribute and participate. Australian firms are receiving growing attention (as compared to the Northern Hemisphere sectors) from local developers for a number of reasons, ranging from a perceived better understanding of Asian culture and business dynamics, to cutting edge technologies and services, to the attractive flexibility of being willing to travel and work hard/play hard attitude, as well as the benefit of working within similar time zones being an obvious value add.
Tourism and recreational development in China has the opportunity that many countries and continents would wish for – they have the ability to learn from the rest of the world’s mistakes, and of course its successes. This is mainly because the surge in market in China is coming late. Many of China’s tourism and hospitality industries are starting in essence, from scratch. While attractions such as ski, golf and wine are not completely new to Chinese, the ability to afford the experience of such things, and at a quality that should be expected – has been sadly lacking until these past few years. While the Chinese leisure market is not completely different from the west, nor from a different planet – there are special nuances that need to be factored into and considered.
Skiing in China is a whole new phenomenon – while already a local industry of 50+ years old, it really has only been in the past five years that the sport has generated any attention. Until then, the slight on skiing in China, aside from the obvious smaller mountains and lower natural snow falls – has been lack of quality venues in easily accessible locations, safe skiing environment, trained and knowledgeable staff, and a variety of attraction options outside of the obvious ski slopes to draw and entertain the multi-generational visitor.
What has been obvious is that supply is limited and demand is high – this split is now diminishing with the introduction of world-class developments under construction – global best practices in service culture and hiring, industry-leading talent to design and operate the projects. The Secret Garden project, in Hebei Province, for example, designed by Whistler’s Ecosign and which will open in 2012, will include over 250ha of skiing, 22 lifts, five golf courses, a main village core of over 600,000 m2, a total bed-base of over 100,000, a world class theme park and convention centre, and winery. The 100-km2 site is only 2.5 hours from Beijing – putting it within reach of over 30 million people in the surrounding cities.
There three other such resorts of similar magnitude on the drawing boards and under various levels of construction at this time. The recent introduction of Club Med Yabuli to the market, in China’s North East province of Heilongjiang, is a strong indication of the world leaders interest in the growing sport and leisure tourism market. The China ski market is currently pitted at five million annual visits – small by global standards, but is projected to hit 20 million by 2020. Needless to say, this growth means a lot of work for the ‘experts’ in the field.
And with the early indications of China’s Governing Bodies striving for future World Cup and global events, as well as a future Winter Olympic bid – the industry can, and will require, support in all aspects.
Twenty-five years after the country’s first modern golf course opened in Guangdong province, China counts approximately 500 golf clubs and thousands of driving ranges, according to the Chinese Golf Association. Though still in its infancy, the sport is spreading—the number of golf courses is growing at 30 percent a year. While golf is considered an elitist activity—an impression reinforced by high initiation and green fee – the surge in development in this sector is also impressive.
*(Pictured) One of China’s many golf courses (Champions Pointe)
Estimates of the number of golfers vary: the CGA counts approximately five million people playing golf in China and a television audience at least 10 times that size, but some contend that the country could have as few as 300,000 golfers.
By comparison, there are about 18,000 golf courses and 26 million players in the US. All of the world’s leading course designers have started to look toward China for new projects, especially as the sport is in decline in the former main markets. Australian course designers have a unique edge to be exploited – with a good understanding of eco-friendly concepts and the ability to work in a variety of site configurations, from mountain, to desert, to tropical – this broad cross section allows for a good understanding of the Chinese topography and needs. Australia’s Ian Stanley (who has designed a number of courses in China) says “I have had a lot of fun playing golf over the years, and met many wonderful people on the courses in China. Let’s not spoil a nice walk, because it’s more than just a game.”
This is very true in the case of golf in China – the industry is still in its infancy. In addition to this, golf, in China not unlike many countries in the world is still a very male-centric sport – reserved for businessmen with the time and means. The CGA recognizes that its future is with the equally large youth and women’s markets are doing all that they can to grow these segments.
Chinese developers are not afraid to seek out the very best in concept, in design and in operation – they know that this comes from offshore and they know that this will cost them money. Projects in China are undoubtedly larger than life (given the large population base to draw from) and in many cases designed to appeal to a broad demographic (from the middle class to the wealthy, from north to south and from grandchild to great grandmother).
Projects are growing to be increasingly diverse in order to appeal to the largest market possible.
The physical product is not something that the Chinese market has trouble financing, absorbing and developing – the soft product is another matter. China typically does not come from a service-oriented culture to the degree that we expect in the west. Substantial opportunities exist for well-trained individuals and corporations to import their skills and talent into the marketplace. There is an ever-growing demand for front line and management training, for skilled operators and talented multi-disciplined culinary staff. Foreign brands, and foreign and local guests expect it, demand it and already are paying for it.
The growing number of 4 and 5 Star hotels opening in China’s numerous second tier cities is staggering and the need for a pipeline of management and staff for these properties is insatiable.
There is a tidal wave of investment pouring into the China tourism market – both domestic and foreign. The government is aggressively re-zoning land to allow attractions to be developed and to boost and supplement the economies of its provinces.
No area in China is left ignored by the explosion of tourism – the country offers bountiful beauty, and often rich in wealth for multiple reasons. The Province of Hebei, for example, not well known as a tourism hotspot as compared to areas in the south, has committed over 100 billion yuan (A$17 billion) into improving tourism access and products in the province over the next five years. “Boosting tourism has become Hebei’s key strategy for improving people’s living standards and achieving scientific development,” the province’s Governor Chen Quanguo said.
There are endless opportunities to input expertise into the rapidly growing industry in China – regardless of what corner of the industry to specialize in. It is not always for the faint of heart but it is certainly one fantastic adventure.
*Justin Downes is the President of hospitality and tourism consulting firm, Axis Leisure Management and is based in Beijing.