China's premier winter resort set to benefit from changing local attitudes

For the past few years, China's ski industry has gone through everything from hype to doubt. For one of the sector's major players, however, the key word has remained perseverance.

Mountain China Resorts, the Canada-listed developer of the Sun Mountain Yabuli resort, has invested some 1 billion yuan ($161 million; 118 million euros) into Yabuli and has yet to see a return. Far from being deterred, however, the company is now looking for further investment into a fourth hotel in the resort, betting on the growing number of middle class Chinese who are looking for new ways to spend their wealth.

"We still consider it a good time to continue investing, given China's economic development and consumption upgrade," says Han Gang, general manager of Sun Mountain Yabuli and executive vice-president of MCR.

The investment for the new hotel is estimated at 200 million yuan. It is going to have 306 rooms, adding to Sun Mountain Yabuli's current portfolio of two five-star hotels, one boutique hotel and 55 mountainside villas.

"The specific plan is still being mapped out. But as our ski runs and equipment are already established, we will focus more on increasing hotel capacity and improving our services," Han says.

Sun Mountain Yabuli has seen a steady increase of 30 percent in its annual revenue since 2010. Revenue last year was about 100 million yuan, 70 percent of which came from hotels, Han says.

The hotels are achieving 70 percent occupancy in the peak season, from mid-December to mid-February, he adds.

Han attributes the rise to the growing number of visitors in recent years, as well as the resort's cooperation with the French resort company Club Med.

Sun Mountain Yabuli is Club Med's first resort in China and is arguably China's first international-standard ski resort. Club Med handles the marketing and manages the resort's two five-star hotels.

"The fact that Club Med is a well-recognized brand is definitely helpful to Yabuli. They are also bringing skiers from other countries into Yabuli," says Justin Downes, president of Axis Leisure, a resort industry consultancy in Beijing.

A growing number of Chinese are being wooed, too. About 70 percent of the customers in Yabuli are Chinese at the moment, up from 60 percent in 2011.

It is also introducing a new vacation concept to the Chinese market.

"Skiing used to be more of an individual activity in China. But with the entry of Club Med, we've seen more families and kids," Han says.

Along with its signature all-inclusive offering of apres-ski, the practice of socializing after skiing, Club Med Yabuli also offers local amenities including mahjong tables, Sichuan hot pot and private KTV rooms that can accommodate a group of 10.

Because, aside from perseverance, understanding the local market is just as important, Downes says.

"Just because you might have been a success in operating a ski resort in Canada or Europe does not mean that you can just pick up that model and drop it in China and expect the Chinese people to appreciate it," he says. "Chinese culture and their spending patterns are different. Their eating and entertaining are different. It's really about creating a blend. It's important to give an international quality of product but also to offer what people want on a day-to-day basis."

The resort currently has a hotel capacity of 388 rooms and ski runs for 5,000 skiers. It has the longest alpine slide in all of China.

With major investments into new ski resorts all over China, Sun Mountain general manager Han says that the competition is not a real concern at the moment, citing the dominating natural advantage of Yabuli.

"They didn't choose Yabuli as the base for China's national ski team for no reason. When it comes to a ski resort, the natural conditions are still primary. Yabuli has all the natural attributes of a top ski resort, from the altitude to the gradient, from the view to the wind speed," he says.

"The order of investment is only a question of time. We invested earlier and now it's their turn, but we'll catch up later, and it won't affect our confidence in Yabuli."

Club Med Yabuli opened for the first time last summer, drawing about 4,000 people for the whole season. "We are also considering developing summer business through a series of projects including hiking, camping, water views and cable rides," Han says.

The real concern for Sun Mountain right now is how to expand its summer business, as the resort aims to be a year-round destination. This means looking for more investment, which Han says is not an easy task amid the downturn in Chinese concept stocks as well as the Canadian stock market, on which MCR is listed.

The inability to access international ski equipment providers in China is another challenge for Sun Mountain. While there are reportedly more than 400 ski resorts in China, there are few indigenous ski equipment manufacturers.

The company spent more than 300 million yuan on its ski facilities. The Poma gondolas and cables are imported from France and the SMI snow makers are from the US, while the piste-bashing machines are from Germany.

Yet few Western ski equipment providers have a production base or provide maintenance service in China.

"When a problem occurs, they have to send the technicians from abroad, making it more costly and time-wasting for us. It's time for them to consider the Chinese market seriously," says Han.

Still, the market takes time to mature. The idea of a weeklong vacation is still new to Chinese people due to travel habits and limits on long vacations.

"People are still taking time to get the concept of vacations, especially ski vacations. But someday they will, and that day won't be far away as long as China's economy keeping growing," he says.

Han estimates that it would take another five to 10 years for MCR to recoup its investment.

"From the experience in the West, it usually takes 16 to 20 years for a ski resort to start profiting," he says.

sunyuanqing@chinadaily.com.cn

(China Daily 03/01/2013 page15)