Ski resort developers in China are betting on the formula of "bigger" plus "better" equals "success" as they look forward to the sector taking off. [Provided to China Daily]

Operators are looking to grow as incomes rise in China and people get bitten by the bug

BEIJING - If the magic of the snow does not pull them in, it seems you have to start looking for other ingredients. Duolemeidi Mountain Resort, one of China's most modern and advanced ski resorts, is providing its visitors with accommodation from this month in an attempt to offset its financial losses in the ski business.

The resort, in Zhangjiakou, Hebei province, has not turned a profit for its Italian investors since it opened in 2006. A lack of real snow, bad weather and China's lack of a ski culture make the country a difficult proposition, said Fabio Ries, co-founder and chairman of the board of Duolemeidi Mountain Resort.

Duolemeidi is not alone in this predicament. Only a handful of China's 20 big ski resorts are in the black, the Chinese Ski Association says.

But instead of packing up their skis and heading home, more and more resort developers are betting on the formula b+b=s, where the "b"s stand for "bigger" and "better" and the "s" stands for "success".

The logic behind the equation is that the growth of China's ski industry coincides with the expanding economy, and with more wealthy Chinese pursuing a healthy lifestyle and recreational holidays, the future of China's ski resort market can be only one thing: sensational.

Next to Duolemeidi Mountain Resort, VXL Capital Ltd, one of Malaysia's leading investment companies, is building a mega project called Secret Garden, and the company wants it to become to China what Whistler, the colossal ski resort in British Columbia, is to Canada.

The first ski slope at the Chinese resort, two hours' drive from Beijing, opened this winter, but the project of 82 ski slopes is not due to be completed for another 10 or 12 years, with investment of more than $1.5 billion.

Dalian Wanda Group, one of China's largest property developers, is also a strong adherent of the theory. "If you build it, they will come". The group, leading five other Chinese investors, including Lenovo Group, the world's second-largest personal computer maker, is spending 20 billion yuan ($3.2 billion), building a vast ski resort in Changbai Mountain, in Northeast China's Jilin province.

The resort features 43 slopes with a skier capacity of 8,000, and is expected to be the largest in China when it opens late this year.

Beidahu Ski Resort, also in Jilin province and one of China's largest ski resorts, with skier visits of 67,000 in the 2010-11 season, is also expanding, with new ski slopes, hotels and condo units, even though the resort has not turned a profit since its new developer took over in 2009.

Liu Xiaoshan, chairman of the board of the Qiaoshan Group of Beijing, which is developing the Beidahu resort, is confident about the prospects.

"The development of the leisure industry moves into top gear when a country's per capita GDP reaches $3,000, which China has already achieved. Experiences from other countries all demonstrate that."

In the US, just 2 million people visited ski fields in 1962, but by the 1980s that figure had climbed to 50 million, he said. In Japan, the rise in the sport's popularity was almost as phenomenal, a 20-fold increase in visits being recorded between the 1970s and the 1990s.

"All kinds of statistics show that China's ski industry is about to take off. China is the largest market for cars and will soon be the largest market for luxury goods. Why can't it become the largest market for skiing?"

The Chinese Ski Association said there were just 20,000 visits to the country's ski fields in 1996. By 2010, that figure had risen to 10 million, a 500-fold increase. The association estimates the number will have doubled to 20 million by 2014.

However, Ries of Duolemeidi Mountain Resort, in which Italy's largest ski resort operator, Dolomiti Superski, has a stake, said the number of China's skier visits can mislead.

"The skier visits may be 10 million but the number of active skiers is probably less than 5 million. And the number of dedicated skiers in China is far fewer than that. Many Chinese go to ski once in their life, get an experience and never come back."

Ries decided to open Duolemeidi because in the early 2000s there was no decent resort in China for an experienced skier like him.

Skier visits in Duolemeidi are said to be increasing steadily every year, but the growth rate is a lot lower than investors had envisaged. According to their plan, Duolemeidi was supposed to have seven lifts and 14 ski slopes before the 2011-12 ski season, but there are only four lifts and 10 slopes.

"There are not as many skiers in China as we expected," Ries said, adding that unlike European countries with 100 years of skiing, China has no ski culture.

Figures from the International Report on Mountain Tourism, issued last year by Laurent Vanat, an independent ski industry analyst in Switzerland, show that even with a small population of about 64 million, average annual skier visits in France over five years exceeded 54 million, the most of any European country.

Average annual skier visits in China, with a population of 1.3 billion, in the past five years have been about 6 million.

Ries said that the development of a ski resort cannot be sustainable in China if the income relies solely on ski tickets. "With the opening of our first condo units this winter, we can have income from those who stay overnight and we can also earn money from those who want to hold conferences in our resort."

He expects to make ends meet this winter, he said.

Beidahu Ski Resort also expects a surge in revenue this winter with the opening of two new five-star hotels. Liu of Beidahu says revenue will at least double, to 40 million yuan, this winter, because his resort has more new beds this season.

A ski ticket for two days in Beidahu costs 640 yuan per person on holiday and a twin-bed room in its five-star hotel costs 1,500 a day.

Liu estimated skier visits to his resort will reach about 90,000, a rise of 45-50 percent from the previous ski season. "The reason for the boom is that China's ski industry is undergoing a transformation from ski sport to snow holiday. People are no longer satisfied with the excitement of skiing from the top of a slope. They also want to have a nice place for a winter holiday and to truly relax."

There is no doubt China's ski resort developers are making every effort to cater to customers' desires. In Changbai Mountain Ski Resort, developed by Dalian Wanda Group, the ski area is the least a visitor can expect. The resort plans show a theater, a museum, a shopping street, a large conference center and nine hotels ranging from three-star to super five-star.

With all kinds of facilities and the latest recreational facilities, the outlay needed to set up a resort is substantial. Ecosign Mountain Resort Planners Ltd, the Canadian company that prepared the master plans for Changbai Mountain, Beidahu and Secret Garden, says it takes about five years for a new ski resort to start making a profit.

"Assuming suitable facilities have been developed and the resort is big enough to attract guests from major population centers, it takes a further five years to pay off the accumulated losses from the first years of operation," said Don Murray, vice-president of Ecosign.

"The supply of China's ski facilities is currently greater than the demand. But the Chinese resort market is developing very quickly. What may have taken 40 or 50 years to develop in North America or Europe will develop in five to 10 years in China," said Murray, who has 37 years' experience in the ski industry.

But in some cases the wait for profits may well be shorter. In Yabuli Sun Mountain Resort, reportedly the best ski resort in Northeast China's Heilongjiang province, Club Med (Club Mditerrane SA), the operator, broke even last winter, after three months of operating the resort.

"The snow-vacation market is much bigger in the EU and the US," said Olivier Horps, managing director of Club Med Asia-Pacific. "That is why we see China as the next big snow-vacation market and we have already successfully created this market and will continue to make it bigger and bigger." Horps said he can tell that the snow-holiday market is booming in China, not only from Club Med Asia-Pacific's sales figures, but also from consumer feedback.

"We've already had repeaters come back to us this winter. It is for sure an emerging trend in the China travel market."

He expected double-digit growth in business this winter.

With the help of Club Med, the high-end resort operator, Melco China Resorts (Holdings) Ltd, which has invested 2 billion yuan in the resort, sees a very promising future in its business.

Cao Yue, executive vice-president of corporate development at Melco China Resorts, said the number of visitors almost doubled last ski season right after Club Med started operating.

"At the beginning, none of our board members thought it was a good idea to invite Club Med to run our place, because the price is very high. But I insisted (on inviting) Club Med here, because a resort is a place for leisure and fun. It is the experience that truly matters, not the price," Cao said.

In Club Med's Yabuli resort, skiing is no longer the only choice for visitors in winter. Cao said that about 48 percent of visitors go for the skiing and others are there to enjoy a snow holiday. Guests who are not into skiing can still relax with yoga, mahjong, and an outdoor Canadian bath and spa.

China Daily