June 16, 2008 / 12:39 AM / 10 years ago

China island sets sights on international tourism market

HAIKOU, China (Reuters) - With a tropical climate and unspoilt, palm-fringed beaches, Hainan has all the ingredients to become one of Asia’s top tourist resorts.

<p>Waves caused by Typhoon Neoguri hit a sea wall in Haikou, Hainan province in this April 18, 2008 file photo. REUTERS/Stringer</p>

But “China’s Hawaii,” as Hainan has been dubbed, only now seems poised to fulfill that ambition as it recovers from an economic slump that has left it lagging other parts of China.

For years, the 48-storey tower that is the tallest building in Hainan province gathered dust as a half-built skeleton like hundreds of other ill-fated construction projects caught in one of China’s nastiest property bubbles.

Now construction is almost over and the plush Haikou Master hotel and serviced apartments is a symbol of the island’s efforts to recover from a meltdown in the early 1990s after a wave of speculation pushed property into the stratosphere.

“Sales are going very well,” said agent Hong Weibin as he showed a new luxury flat in the complex.

Almost all of the 16 million sq m (172.2 million sq ft) worth of construction left unfinished after the crash has either been completed or bulldozed, and investors are returning to Hainan.

The anything-goes development model is gone, replaced by an intense focus on forging the tropical island in southwest China into a tourist destination to rival Thailand’s beach resorts.

Top resorts are opening in droves. The island is planning to broaden a visa exemption scheme, opening duty-free shops, improving infrastructure, building airports, expanding air links and promoting foreign language studies.

“Tourism is the industry in Hainan with the most distinguished features, the most potential and the most competitiveness,” vice governor Chen Cheng said late last month unveiling a strategic blueprint for development.

“It’s very attractive,” said Ian Zheng, Managing Director of the Pacific Alliance Asia Opportunity Fund, which holds a $150 million stake in the group that owns Hainan’s main airports and is also invested in a Beijing property firm working in Hainan.

“I really don’t foresee any big, material risks.”

NO LIGHTS ON

If the island’s azure coast doesn’t immediately attract droves of international beachgoers, then the fast expanding pool of domestic tourists will almost certainly prop up the industry.

The potentially huge Chinese market is a major draw for the resorts, who hope to leverage on the millions of people who have benefited from the country’s economic boom and are increasingly adopting Western lifestyles and aspirations.

“Some of the estimates I’ve seen suggest 450 million middle class Chinese in 10 years from now,” said the Banyan Tree Sanya’s general manager Peter Pedersen. “I think Sanya has a huge potential.” Last month alone saw the Ritz-Carlton, the luxury arm of the world’s number three hotel operator, and the Banyan Tree open resorts in Sanya, where the island’s premier beach resort sits. The Mandarin Oriental follows later this year.

It marks a huge change for Hainan, which until recently has been mainly known in China as a place for cheap package tours.

“Sanya is one of the real new tropical destinations in Asia, and in China in particular of course it is the only tropical island,” Pedersen told Reuters.

“It’s becoming more and more in demand for both the local market and the international tourist market. It makes a perfect spot,” he added, standing on the top of one of the resort’s individual pool villas, which go for some 5,000 yuan a night.

SHENANIGANS

A test-tube for development after becoming the country’s youngest and economically freest province in 1988, Hainan’s economy revved into a frenzy to the point where giddy officials even tried to sell the city’s main park to developers.

While other coastal provinces blossomed, Hainan languished. Now, Hainan finally seems to be finding its feet, but analysts and investors warn that imbalances and friction could upset the island’s revival.

In Haikou, the capital, some 60 percent of new flats are bought as second homes by people who aren’t from Hainan, a problem the mayor Xu Tangxian acknowledges.

“There are some areas where the homes are all sold, but there are no lights on at night,” Xu said in an interview.

While most tourists to Hainan are mainland Chinese -- 18 million last year against just 750,000 overseas visitors -- the government is working hard to attract affluent foreigners, who it hopes will boost the island’s reputation and coffers.

The goal is to “within five years, attract 20 famous international hotel management groups, and make the number of five star, international-standard resorts rise to 60 or more,” provincial tourism bureau head Zhang Qi said last month.

As developers drool over the tourism boom, tales of the usual shenanigans are emerging.

In the rural township of Longqiao, about a 40-minute drive from Haikou, rust red earth is tilled up in long, wide swaths across the low hills, golfing fairways in the making.

Locals say officials convinced them to sell their land for a golf course. In early April, when a rumor circulated that the government had sold the land to the golf course developer for some 10 times what the locals were paid, they were irate.

An angry mob flipped a police car. Later, when a crowd gathered in a nearby schoolyard, police fired tear gas, witnesses said.

In the southern town of Sanya, some say bottlenecks and corruption are starting to take a toll. One Western investor said he was having trouble getting a project off the ground due to “off the charts” graft.

“The permit process has taken months longer than we expected,” he said.

Yet despite the hassles, the bullishness about Hainan’s natural prospects in tourism is die-hard.

“I think what you see in Sanya is only the tip of the iceberg. The island of Hainan is still very big. You have beaches more or less all the way up to the capital Haikou. The island is 350 km in diameter,” said Banyan Tree Sanya’s Pedersen.

“The sky’s the limit here.”

Additional reporting by Ben Blanchard in Sanya; editing by Megan Goldin

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