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REAL ESTATE: Resort Development in Mountain Attraction Areas and at World Heritage Sites in China
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CBRE
alt Recent research conducted by CBRE Hotels has noted that the World Heritage Committee has now included 41 China based properties on the World Heritage List, 13 of which are mountain associated destinations. Further investigations have found that great potential exists for development of mountain resorts, with opportunities currently being sought both by developers and hotel operators.
Traditionally, people visit mountain attractions, mainly to enjoy the scenery, but more and more, they are looking for better quality hotels, adventure, and new experiences.  However, compared to urban hotels, insufficient hotel supply and generally low service and product quality at mountain destinations has restrained some of the demand from mountain lovers and other potential guests,Mr. Keith Humphreys, Executive Director of CBRE Hotels said.

Mountain Attractions - Tourist Arrivals

CBRE Hotels recently undertook in-depth research of seven well-known mountain destinations in China: (i) Mount Huangshan, (ii) Wulingyuan Scenic and Historic Interest Area, (iii) Mount Changbaishan, (iv) Mount Sanqing, (v) Mount Qingcheng, (vi) Mount Wuyi and (vii) Mount Emei Scenic Area.
Tourist arrivals in the cities where the above mountains are located have increased rapidly from 2006 to 2010. Those cities with the most attractive natural resources and more sophisticated tourism products, the prefecture-level cities : Huangshan, Zhangjiajie, and Shangrao (where Mount Sanqing is located), have enjoyed the most tourist arrivals in absolute numbers, whereas the number of arrivals in Mount Changbaishan increased the fastest at a rate of 26% annually. 
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Huangshan is the leader in terms of tourism revenue generation over the past four years, as both arrivals and tourism income reached a new peak in 2010. The income from tourism in Shangrao also increased rapidly and outranked Zhangjiajie in 2010, while the income of Wuyishan also increased sharply in 2010, an annual increase of 54%. Interestingly, tourist income of Wuyishan is greater than the figure for Dujiangyan  although its arrivals are lower, most likely due to stronger spending power in Wuyishan. 
Mountain destinations are highly influenced by their natural environment, scenery, climate, and so on, but also national and global social and external economic factors. For instance, many of the buildings and heritage properties in Mount Qingcheng and Dujiangyan were damaged by the 5.12 scale earthquake in 2008. Additionally, countrywide travel restrictions applied during the Beijing Olympic Games and the more recent global financial crisis have all restrained travel demand to mountain areas.

Mountain Attractions - Star Ratings

Most existing mountain resorts are of a relatively small scale, and are located in the related town or city centre, or near the main attractions themselves. Usually, the local government or an investor takes over major responsibilities in developing and managing the resorts. However, more and more international hotel companies are showing interest in operating resorts in such mountain regions. The chart below shows the current star-rated hotel market in the previously mentioned mountain areas:
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Annie Wang, Associate Director, CBRE Hotels said the performance of mountain resorts is affected by several main factors.  New high end, international brands will drive the ADRs to higher levels. For example, the opening of Howard Johnson at Mount Qingcheng and The Pullman in Zhangjiajie have already driven ADRs higher than those of resorts in other mountain destinations. On the other hand, special characteristics of a resort, such as hot springs or forest reserves, can help the resorts differentiate themselves from other locations, a notable example being Hongzhushan Hotel at Mount Emei.

Opportunities 

altAs hotel supply in many first, or even second tier cities, in China, is close to saturation, more investors are seeking niche markets such as mountain destinations for development. Such resorts will usually enjoy a lower cost of land and construction, compared with urban hotels. The low seasons of urban hotels are usually considered as the peak season for resorts; for instance, an increasing number of Chinese travellers like to go to mountain resorts for skiing  in the winter, especially during the Chinese New Year period, continued Ms. Wang.
Keith Humphreys agreed, adding, Demand for exploring spectacular scenery and experiencing diverse cultures within one's home country has increased dramatically. Chinese travellers have shown strong interest in experiencing quality local attractions, international standard accommodation, and service without having to fly a number of hours to get to their destination.
Large scale, better quality development in mountain resorts not only reflects increased demand from the market, but also shows the increasing confidence of international hotel management companies. The move towards hotels being operated by international hotel brands is expected to continue. From an investors point of view, co-operation with international brands can both value add and induce demand.

The changes of lifestyle, from sightseeing to leisure experiences

Nowadays, experiencing a destination lifestyle has been emphasised as being more important than sightseeing. For example, an international tourism resort which is currently under construction in Changbaishan reserve area will offer a world class ski resort, including pedestrian villages, internationally branded hotels, visitor centres, theatres, shopping streets, recreation centres, spas, villas, and leisure facilities.
Seasonality is one of the major concerns for mountain resort developments. It is important to provide a variety of on-mountain activities and facilities for todays discerning mountain travellers. Activities such as rafting, climbing, Bungee jumping, fishing, golfing, and bike riding in summer and hot springs, skiing, or snowboarding in winter will not only become the unique selling points of a mountain resort, but also will increase the profit margins in low seasons. added Ms. Wang.
Generally, comprehensive, integrated tourism facilities, standardised, quality management, comfortable accommodation, a natural scenic environment, and application of environmentally friendly practices are factors which will all, going forward, reinforce a mountain resorts performance.

Types of Developmentalt

Keith Humphreys also revealed that some resort developers have been prepared for the risk of being the first hotel to open at a location, such as Banyan Tree Resort in the old town of Lijiang, InterContinental Resort Jiuzhai Paradise in Jiuzhaigou, Howard Johnson Hotel in Dujiangyan, near Mount Qingcheng, or Anantara Xishuangbanna Resort & Spa in Yunnan Province. Such first movers, are likely to enjoy larger market shares and higher profitability; the so called first mover advantage.  He added that, of course, some projects have higher risks in terms of uncertainty of market trends, limited local market evidence or knowledge, government regulations. and so on, but generally the pioneers tend to do well.
Accommodation product mix is considered important as it helps to determine the best fit of the product, and its supporting land uses to the natural landscape, and to further meet the varying needs of target markets. The real estate component, if any, may include strata titled hotels, timeshares, and other vacation ownership options (second homes). This model has been recognised and applied by many real estate developers in order to secure early return on capital.  For example, a project developed by Greentown Properties, located in the Qiandao Lake area contains a 250-room Sheraton Qiandao Lake Resort, and two blocks of hotel-apartments. 
Keith added, Mixed-use leisure developments in mountain areas have the potential to generate high profits within short investment return periods. However, the requirements for distinctive locations, good brands, quality products, and personalised services are much higher than with other hotel types.He continued, in some cases, where the land cost has been relatively low, it can take about 2 to 2.5 years to achieve the investment return for some well known, internationally branded properties who have developed, or manage mixed use hotel/residential projects.

Challenges and Suggestions 

Our research shows that, for mountain destinations, international tourist arrivals and expenditure are only a small proportion compared with the numbers of Chinese domestic travellers. In the increasingly competitive international tourism market, raising regional or even global awareness of an attraction is critical at the initial stage of mountain resort development as it will take a long period to establish the destination and expand market share. World renowned international mountain destinations, such as the Swiss Alps Jungfrau-Aletsch, Yellowstone National Park in the USA, the Canadian Rocky Mountain Parks, the Great Blue Mountain Area in Australia, or even domestic locations which are already well known by international tourists, such as Sanya in Hainan, the Old Town of Lijing,  Dali in Yunnan, or the  world famous Guilin Scenery, can be considered as some of the competitive travel options to China mountain destinations. 
Resort development in mountain areas, and tourism development of World Heritage Sites in China is still in its preliminary stages. In order to blend with the local social and economic environment, and to determine whether the proposed mountain resort has the potential to be economically viable, a market study and financial feasibility analysis is required to indicate the potential return on investment associated with the proposed resort(s).
 
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