A recent report by McKinsey & Company reported that China will account for approximately 20 percent of global luxury sales in 2015, and that the upper middle class (approximately 13 million households) offers the strongest new growth opportunity.
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Demand for luxury goods has traditionally focused on products such as designer bags, watches, fashion and the like.
However, as Chinese consumers are increasingly exposed to luxury products and disposable income continues to improve, a trend from luxury goods to luxury experiences will be increasingly prominent.
According to the McKinsey study, consumption of luxury services is growing faster than for luxury goods, with 20 percent of consumers saying they were spending more on experiences, only 13 percent on products'.
"Demand for experience based activities such as resort hotels, spas, wellness retreats and travel are expected to continue to grow in line with increased disposable income and increased leisure time" said Keith Humphreys, Executive Director of CBRE Hotels China. "Many investors and developers are aligning their future hotel development strategies to capitalize on this market opportunity" he said.
China's Increasing Travel Demand In 2010, 57.4 million Chinese travelled overseas, a small proportion considering China's population of 1.3 billion. In contrast, domestic travellers reached 2.1 billion in 2010 representing an increase of 11 percent compared to 2009. Domestic travel will continue to offer competitive and more convenient alternatives to international travel, with many resort destinations within two to three hours flight of major cities.
China will also benefit from increasing demand by inbound tourism arrivals. China is now the world's third largest tourism destination and accordingly to the United Nations Tourism Organisation (UNWTO), China has the potential to pass France and become the number one tourism destination by 2015.
The combination of inbound and domestic tourism demand in China will drive differentiation in the hotel market and lead to the creation of alternative hotel and travel offerings, such as resorts, wellness retreats and spas which CBRE Hotels believes is an opportunity which has not yet been maximized in the market.
"China has already shown potential for resort and leisure destinations, with Hainan Island demonstrating high demand for resort style hotels" Annie Wang, Senior Consultant, CBRE Hotels said. However, China's regional diversity offers enormous yet unrealized opportunities for resort development based on unique cultural and natural environments, and I expect to see an increase in new emerging resort destinations in the future", Annie Wang, Senior Consultant, CBRE Hotels said.
Investment in Resorts Hotel investors and developers see strong growth potential in the resort market, and are seeking to capitalize on opportunities which will provide long term returns.
Banyan Tree, the Singaporean based luxury resort developer, successfully closed the RMB 1.07 billion Banyan Tree China Hospitality Fund in January 2011. "The China Fund will further enable us to establish a portfolio of resorts and hotels in the fast developing economy of China" said Mr. Ho Kwan Ping, Executive Chairman of Banyan Tree Holdings.
Banyan Tree is expected to target scenic resort locations with unique characteristics located near Tier 2 and 3 cities. This will enable Banyan Tree to capitalize on lower cost of land whilst maximizing significant potential for value appreciation and financial returns in the mid to long term. Banyan Tree has already positioned itself as a leading luxury resort developer in China, with award winning resorts in locations such as Lijiang, Ringha, Sanya and Hangzhou.
Six Senses Resorts and Spas, whose core purpose is "to create innovative and enlightening experiences that rejuvenate our guests' love of SLOW LIFE" (Sustainable, Local, Organic, Wholesome Learning, Inspiring, Fun, Experiences) is also targeting China.
The first resort will open in Qing Cheng Mountain, in Chengdu, Sichuan, a UNESCO World Cultural and Natural Heritage Site. The concept of the resort with be to "embrace Taoist and Chinese architecture and design principles" and will be designed to blend with the local terrain and complement the natural landscape.
Capturing the China MarketFosun, a large nonâGovernment controlled group in China, acquired 7.1 percent of French resort operator Club Med in 2010. Club Med hopes to capture Chinese demand for their resorts, located both within China and abroad. In China, Club Med's Yabuli Ski Resort in Heilongjiang is the first of five properties Club Med is planning to open in China.
Furthermore, Club Med expects China to be its second most important source market in the next five years, and aims to attract 200,000 Chinese guests to Club Med resorts worldwide by 2015.
China is also deemed the number one growth market in the world for Hilton, and the hotel management company sees development within China of Hilton branded hotels as a key way of gaining brand recognition in the domestic market in order to also capture a slice of Chinese outbound guests.
Attracting Chinese outbound tourists appears to be a sound strategy as the number of outbound travellers rose 20 percent to reach 57.4 million in 2010, and is forecast to climb to 65 million in 2011.
Total spending by outbound Chinese tourists ranked fourth largest worldwide with Chinese travellers spending US$40 billion trips abroad in 2010, a figure forecast to reach US$50 billion in 2011.
What is a resort?The term resort' is traditionally associated with a hotel (sometimes with residential and/or timeshare components) that is located in particularly attractive natural or cultural environment.
For example, resorts can be located on ocean settings, such as Sanya on Hainan Island, Lake/River environments such as Four Seasons Hangzhou West Lake, Mountain/Ski Resorts such as Club Med Yabuli, or a combination of culture and nature, such as the Banyan Tree properties in Lijiang and Ringha in Yunnan Province.
The definition of resorts has widened in recent years, with the advent of urban resorts' which provide a retreat within a busy city environment, to bizresorts' or business resorts, which aim to provide a cutting edge business hotel with luxurious wellness and spa offerings often reserved for resort environments.
A resort may also comprise a branded residential component, which can be sold to investors looking for a second home' or holiday retreat with the same level of service experienced with hotel stay, but with the management of a resort operator to manage, maintain and in some instances, rent the residential component when not being utilized by the owner. This not only enables investors to buy into a lifestyle residential retreat, but also provides developers with additional cash flow during the development of the resort.
A Hotel Stay or An Experience?For luxury resorts, guests do not merely seek a room and a meal in a nice location. The provision of a unique experience' is the most important characteristic of successful luxury resort, but also the hardest to differentiate and deliver on a consistent basis. Whilst physical design and facilities can be relatively easily developed, exceptional service levels are difficult to imitate.
For example, guests visiting Amankora resorts in Bhutan (Aman meaning peace in Sanskrit and Kora meaning circular pilgrimage in Dzongkha, the Bhutanese language) stay in rustic yet contemporary lodges all offering distinct local features, set amongst dramatically beautiful topography, whilst also experiencing Bhutan's rich cultural and spiritual heritage.
At the Soneva Kiri by Six Senses, guests arrive by private plane at the remote tropical island of Koh Kood, known for its pure waterfalls, crystal clear waters and traditional village life'. Developed with ecological sustainable design and materials, guests stay in exclusive suites and villas and experience a variety of dining concepts, including an exclusive treetop dining pod' suspended in the canopy of the rainforest. Whilst these properties offer a distinctly different product, they both ffer guests a unique experience' not found in traditional standard hotels.
Critical Success Factors in Developing a ResortWhilst there is no cookie cutter formula for developing a successful resort, there are some critical factors that will determine the success of a luxury resort experience:
- Unique: The resort should offer a combination of a unique setting, concept, design or service, which cannot be easily replicated.
- Location: The location should be naturally beautiful and unique, and provide a dramatic backdrop to the resort. Alternatively, the resort should be located in an area characterized by a distinct culture which attracts and enriches the guest's experience.
- Architecture and Design: The design of the hotel building should be unique and innovative, and in many cases, aim to blend with and/or complement the natural environment.
- Facilities: The quality, range and design of facilities are often exceptional.
- Exclusivity: It is essential that luxury resorts and residences provide high degree of exclusivity to create demand for the resort and attract guests willing to pay a premium for rooms and/or residences which have an exclusive nature.
- Service: The most important characteristic of a luxury resort, yet the most difficult to consistently provide, is a highly personalized level of service which creates a memorable impression and encourages repeat guest stays.
1 - McKinsey & Company, Tapping China's luxuryâgoods market, April 2011
CBRE Hotels Resort SpecialistsOur Asia team has worked on many award winning resorts and their expertise has seen them work in locations as diverse as the Maldives, China, Thailand, Oman, Bali, Fiji, Vietnam, United Arab Emirates, Sri Lanka and Vanuatu. Our resort services range from project feasibility, concept planning, preliminary planning and design, through to negotiating management agreements with resort operators, valuations and managing sales of branded residential units. For further information, please contact Keith Humphreys or Annie Wang to see how CBRE Hotels can assist you in developing your resort. www.cbre.com.hk 
