17 February 2019

Fosun to catch a wave in the resort market

Buying a high-rise property in downtown Manhattan may have been a one-off shot by Chinese billionaire Guo Guangchang {郭廣昌} to snap up a bargain overseas in the battered sector, but he is for sure dead serious about the immense opportunities brewing in a burgeoning market at home. That is evident from the initiatives being taken by Fosun International Ltd. (00656.HK), the investment arm of China’s biggest private conglomerate that is owned by Guo.

The latest news is that luxury resort and theme park operator Kerzner International is now poised to make a bold entry into China with its renowned Atlantis brand. The plan is to construct a massive complex incorporating deluxe hotels, aquariums and upscale malls in Sanya, a popular tourist destination in southern China’s Hainan province. Fosun will foot the bill of the project while Kerzner will be responsible for daily operations.

The Persian and Babylon style mega development in Sanya will be the world’s third Atlantis resort following Atlantis Paradise Island in the Bahamas and Atlantis The Palm in Dubai. The project will cost Fosun at least 10 billion yuan (US$1.64 billion) but Guo has still pledged to finish it within three years.

Guo simply shrugs off funding concerns when confronted by the media. “The project would be well within the company’s capacity,” Beijing News quoted him as saying. He even ruled out any fundraising need, just saying that some residential and commercial space in the Sanya project might be sold to recoup part of the initial investment.

The project is just the latest chapter in Guo’s sizzling bid to boldly scale up his exposure to the tourism industry to extract its full potential. In July, the tycoon splashed out 512 million yuan for a 1.97 percent stake in China International Travel Services Corp. (601888.CN) and became the third largest shareholder of the state-owned firm.

Market observers are generally optimistic about Guo’s ambition to lead the charge in the fast growing resorts sector, especially at a time when Fosun’s pillar businesses — pharmaceuticals, property development, steel and mining — have all shown encouraging signs of improvement.

The two Atlantis complexes in Dubai and the Bahamas can easily amass US$1 billion and US$600 million respectively as annual operating revenues. A senior Kerzner executive was quoted as saying that one fifth of overseas visitors to the group’s Dubai and Bahamas complexes are from China.

Fosun’s Sanya project can only be more lucrative since this buoyant southernmost tropical city teems with big-spending vacationers. Zealous support from the local authorities can be another plus.

Analysts say a unique synergy can be formed on strength of Fosun’s previous investments – its 20 percent stake in the well-known commercial property operator Yuyuan Tourist Mart (600655.CN), partnership with French resort developer Club Méditerranée, shareholdings in luxury American fashion brand St. John and jewelry and watches vendor Folli Follie, etc.

It is possible that all these brands will flock to the Sanya project and any other Fosun developments elsewhere across the country. And, Focus Media Network (08112.HK), one of China’s largest out-of-home advertising agents in which Fosun has a 17 percent stake, can certainly take charge of a strong nationwide publicity and promotional campaign.

– Contact the writer at [email protected]



EJ Insight writer

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