Thursday, 11 March 2010

Boom time in Hainan

Property, stock prices soar with plans to turn it into China’s answer to Hawaii

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Guanyu 道 said...

Boom time in Hainan

Property, stock prices soar with plans to turn it into China’s answer to Hawaii

By The Straits Times China Bureau
19 February 2010

Hotel room rates shot through the roof on Hainan, China’s sunny island in the south, as a tourism boom there over the Chinese New Year break took even businesses by surprise.

Five-star lodgings in Sanya, the island’s main resort town, went for as much as 15,000 yuan (S$3,100) a night, nearly 10 times the price of comparable rooms in China’s most expensive cities such as Beijing and Shanghai.

Main carrier China Southern made last-minute plane diversions, adding more than 30 flights to cash in on the sudden influx of holiday tourists.

The latest surge is part of a larger Hainan craze in China that has sent the island’s property and stock prices soaring to feverish levels, even as analysts remain mixed about an ambitious Beijing plan to turn the island into China’s answer to Hawaii.

Early last month, the Chinese government unveiled a blueprint for transforming the country’s southernmost province into a top international tourist destination by 2020.

Building on Hainan’s natural strengths such as its year-long warm weather and golden beaches, the proposal - largely thin on details - discussed possible measures. They included providing visa-free travel and duty-free shopping, building a cruise centre and even developing a gaming industry, which some experts took to mean a horse-racing venue.

The aim is to ensure the island’s ‘tourism-related facilities, management skills and service levels are in line with international standards’ in 10 years’ time, the document said.

The plan unleashed pandemonium, as literally plane-loads of investors and speculators, convinced that Beijing was about to throw serious money at Hainan, touched down on the island to grab a piece of the action.

The stock market reacted first, with most Hainan-related shares jumping by the maximum 10 per cent on the day of the announcement. In the following weeks, the share price of Lawton Development, which owns hotels in Hainan, leapt by 150 per cent, while Hainan Expressway and Haikou Agriculture came close to doubling in value.

Real estate prices went berserk, too.

In five crazy days after the plan’s unveiling, property buyers chalked up a sales value equal to that for the entire year of 2008. Prices doubled, and doubled again.

One high-end project, Fenghuang Island, saw all 700 units snapped up on the first day of its release, despite posting an average price of 70,000 yuan per sq m. This works out to $1.75 million for the equivalent of a five-room flat.

‘I was prepared to pay the full amount in cash, but even that wasn’t enough to get me a unit,’ said a speculator, who had been keen on the project.

Despite the hype - or, some say, because of it - many are already predicting an uphill battle for Hainan.

Pricey hotel rooms might prompt travellers to turn to cheaper getaways and fears of a property bubble could discourage more serious investors, analysts said.

Deterred by the exorbitant charges, some Chinese travellers have opted instead for tours to Singapore, Thailand and Malaysia, said Chinese media reports.

‘We’re trying to build an international tourist destination, but it looks like the prices here have gone ‘international’ faster than anything else,’ quipped Mr. Che Shouhui, assistant to the chairman of major Hainan construction firm Sanya Daxing.

The island also needs to work on becoming more tourist-friendly. Dirty toilets, cab drivers who refuse to turn on their meters and roadside peddlers trying to sell tourists fake goods are just some of the teething problems documented by the local media.

But the province’s officials, encouraged by Beijing’s latest call, have already jumped into action, and remain optimistic.

Guanyu 道 said...

Hainan’s tourism chief Lu Zhiyuan has pledged to clean up the island’s toilets in one year, adding that the government promises to ‘devote a much greater amount of human and material resources’ to raising the standards of Hainan’s tourism industry.