He likes holidays

Fosun's boss betting billions building hotels


18 Oct 2013
Week in China

Are Guo Guangchang’s investment decisions guided by his wife’s shopping habits? In 2011, the president of Fosun, China’s largest private conglomerate, told reporters that he had bought a 9.5% stake in the Greek jewellery and luxury goods retailer Folli Follie because “my wife loves the brand too much”.

Two years later he’s just announced that Fosun has struck a deal with hotel operator Kerzner to build the Atlantis resort on Hainan island, after spending a memorable holiday at the Atlantis Dubai during China’s National Day holiday week.

“I often ask my wife: can you find a holiday destination where our family can have fun shopping and eating,” Guo told a press conference. “We found such a place and that’s Atlantis Dubai.”

Atlantis Sanya, which is scheduled to open in 2016, will set Guo back Rmb10 billion ($1.5 billion). The resort will be wholly-owned by Fosun but operated by Kerzner, which manages another property in the Atlantis franchise in the Bahamas. The 153-acre resort will include 1,300 hotel rooms, 18 bars and restaurants, a water park and a dolphin show.

The increase in investment in the tourism business is to cater to the changes in consumer behaviour

Atlantis Sanya will face stiff competition for guests. The beach resorts of Sanya are already a hugely popular destination for Chinese travellers. Over 22 million overnight stays were registered in Hainan in the first eight months of the year, most of them by domestic tourists. To accommodate the inflow, Sanya has more than 200 hotels and many more are in the works. Just last month, Raffles opened its first hotel in Sanya. Starwood’s Westin Hotel also debuted its new resort on the island early this month.

Fosun’s latest investment isn’t a great surprise. Guo is outspoken about his plan to overhaul China’s huge but relatively underdeveloped tourism industry. “I love travelling but being on the road (in China) is not just joyful but also painful,” he confides, adding that he went to Dubai because he was fed up with the long queues at Hong Kong’s Ocean Park.

To that end, Fosun announced that its tourism division will invest as much as Rmb100 billion in tourism-related properties in China (without revealing a timeline). The conglomerate also grabbed headlines earlier this year when it announced plans to acquire the remaining stake in Club Med from French group AXA (Fosun already owns 19.3% in the resort operator). Club Med recently opened a second resort in China, with three more planned by 2015.

“The increase in investment in the tourism business is to cater to the changes we see in consumer behaviour,” Guo told International Finance News. “As incomes rise, Chinese consumers now seek out experiences as a major part of their consumption. And as they become more educated, they also become more aware of the quality of the places they visit. So Fosun is positioned to capture these changes.”

Other investors are drawing similar conclusions. Last year, private equity firm Carlyle bought a stake in Mandarin Hotel, a mid-market chain, following an earlier investment in Hangzhou-based New Century Hotel in 2007. Prax Capital invested in Shandong-based hotel and restaurant operator Blue Horizon Group in 2008, while SAIF Partners bought a stake in Shenzhen-based operator Vienna Hotel Group in 2007, says the Wall Street Journal.

Chinese tourists are already the world’s biggest spenders. Last year they spent $102 billion, a 40% increase from the year before, and enough to take them above the Germans and the Americans, says the United Nations World Tourism Organisation.

They are also becoming more sophisticated in their travel preferences. Instead of joining tour groups, the majority are going abroad with their own itineraries, travelling alone or with family and friends. A survey from Chinese International Travel Monitor earlier this year revealed that 62% of travellers said they prefer to travel independently, while a hotelier report said that only 30% of their Chinese guests were arriving in larger groups. In 2011 the independent-versus-group ratio was evenly split.

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