Insight: China's winter resorts face tougher terrain despite Olympics excitement

Vanke Overseas Investment Holding

06/02/2018 01:28

* China ski visits in 2017 +16 pct y/y to 17.5 mln 
    * 2022 Olympics helping to spur resort investment 
    * But ski operators in Beijing caution that business is 
slowing 
    * China firms looking to replace foreign ski equipment 
companies 
 
    By Pei Li and Elias Glenn 
    MENTOUGOU, China, Feb 6 (Reuters) - At its peak a decade 
ago, the Muchengjian mine churned out mountains of coal on the 
western outskirts of Beijing. 
    Now, the mine in Beijing's Mentougou district is pinning its 
future on whiter slopes: It plans to transform itself into a 
winter sports resort, turning some of the underground shafts 
where miners once chiselled coal into a 1.25-kilometer 
airconditioned track for cross country skiing.  
    An apres-ski spa and a department store selling winter 
sports gear are also on the drawing board. 
    Muchengjian's planned ski resort, planned for completion 
later this year, is just one of many popping up across northern 
China as local governments look to pivot economies from heavy 
industry towards consumer services - and cash in on a skiing 
boom fuelled by rising incomes and changing consumer tastes. 
    Skier visits to Chinese resorts rose 15.9 percent last year 
to 17.5 million, according to the China Ski Industry White Book, 
an annual report by Carving Ski, a Beijing-based ski industry 
consultancy, distributor and service provider. 
    The boom is also underpinned by a pledge by President Xi 
Jinping to get 300 million Chinese on skis and skates for the 
2022 Beijing Winter Olympics. 
    However, the rush to build slopes is raising concerns about 
misplaced investment that could hold back the long-term 
development of the industry, experts say. 
    "A lot of money wants to join the industry, but they have no 
idea" how to invest, said Bennie Wu, chief executive of Carving 
Ski. "We don't want too much money to come in with no clear 
idea. It's not good for the market." 
    China currently has more than 700 ski facilities - outdoor 
and indoor - nationwide, and Wu warned that some would struggle 
to survive after the Olympics shine wears off.  
     
     
    Outdoor ski resorts are also being reined in as the 
government steps up environmental requirements, including on the 
water used for snowmaking in the arid north. 
    Chongli, a town about four hours by car from Beijing that 
will host Olympic ski events, spent 550 million yuan on 
improvements to a nearby reservoir in 2014 in order to supply 5 
million cubic meters of water annually to local ski resorts for 
snowmaking, according to state media.     
    Chongli has capped the number of large resorts in the area 
at nine, while Beijing has also stopped approving new large 
outdoor ski facilities.  
    Operators of ski facilities say other challenges include a 
lack of qualified staff such as instructors and that rising 
costs related to staff, energy, environmental regulations, and 
water are putting pressure on profits. 
    Nanshan Ski Village in Beijing's Miyun District, the biggest 
and most popular ski resort in the area, provides an example of 
the challenges facing new entrants to the market. 
    Like other ski facilities in the capital, Nanshan is easy to 
spot as the resort's 100-acre white patch stands in stark 
contrast to the brown of the mountains that surround Beijing on 
three sides. 
    Nanshan's general manager, Hu Wei, said visits were down 
this winter. Last year, the resort registered 260,000 visits and 
another Nanshan official said the ski park was on pace for about 
230,000 visits this year. 
    "People assume right now is a period of rapid growth for the 
industry, but it's actually not that easy," said Hu. 
    Some of the Nanshan skiers may have migrated to the larger 
resorts in Chongli. While Beijing ski visits fell 2 percent to 
1.67 million last year, visits in Hebei province, where Chongli 
is located, rose 44 percent to 1.76 million, according to the 
Ski Industry White Book. 
     
    PUSHING AHEAD 
    Despite the challenges, Muchenjian is forging ahead with its 
plans, betting on the growing number of winter sports 
enthusiasts in China - as well as the competitive driving force 
of the Beijing Olympics. 
    "China spends big money setting up the stage, and the 
performers are all foreigners," said Liu Bo, a former trainer 
for national ski teams who is investing 2 billion yuan ($318.43 
million) in the Muchengjian project, referring to the Olympics. 
"President Xi will not allow this to happen. We have to be the 
leading actor in 2022." 
    In addition to skiing, the resort will also include 
restaurants and sightseeing - a train that used to carry coal 
will be transformed into a passenger line for tourists. The hope 
is that all this will provide employment for the 1,000 people 
who still work at the mine, which is located in a hilly area 
outside the capital. 
    Other Chinese businesses are also hoping to cash in on the 
skiing boom. 
    "I don't think we have any problems in terms of demand, 
because we have a large enough middle class now," said Carving 
Ski's Wu. "People are richer. They want to spend their money." 
    Those in the industry say it will be difficult for Chinese 
companies to displace foreign ski and snowboard brands due to 
quality differences, but that there are opportunities in 
snowmaking equipment, groomers and apparel. 
    Chairlift makers including the state-owned Beijing Materials 
Handling Research Institute have also begun to make inroads 
providing the lifts that pull or carry skiers to the tops of 
slopes. 
    Anta  2020.HK , China's biggest sportswear retailer, has set 
up a joint venture with the Japanese ski apparel Descente and 
the South Korean brand Kolon, making things like ski jackets.  
    "Winter sports will be our No.1 hot spot in 2018," Li Ling, 
vice president at Anta, said last month. "We hope to provide 
affordable equipment and gear, and change the current situation 
where most gear is expensive."  
     
    HAZARDOUS SLOPES  
    The enthusiasm for winter sports and the Olympics has 
attracted many investors including developers like China Vanke 
Co  000002.SZ  and Dalian Wanda Group Co., which have built 
large resorts in Jilin province in the northeast. 
    Wanda reportedly sold its Changbaishan International Resort 
last year amid a broad restructuring of its holdings but 
continues to manage and operate the resort.  urn:newsml:reuters.com:*:nL3N1O51IF 
    Vanke is also building what will reportedly be the last 
large resort in Chongli as the local government caps 
development. 
    Despite such high-profile resorts, Carving Ski's Wu 
cautioned that less than 10 percent of China's 703 ski locations 
could be considered "high-quality". 
    That raises the risk that Chinese skiers, about 80 percent 
of which are first-timers, could lose eventually interest in the 
sport, hurting the long-term potential of the industry, 
according to industry executives. 
    "What we see frequently is that a lot of skiers come to a 
resort, take a selfie, and never come back, or come back a year 
later," said Muchengjian's Liu. 
    To boost interest, ski training companies are being set up 
at resorts, inviting in instructors from countries like Canada 
and Austria. 
    Resorts - and the Chinese government - are also trying to 
get children hooked on skiing from a young age. One government 
effort involves encouraging schools to arrange ski outings for 
kids. 
    On a recent weekday at Jundushan Ski Resort in northern 
Beijing, hundreds of young kids were participating in ski 
classes. 
    "In our local Changping district nearly 20,000 students from 
73 schools will try out skiing this winter," said Qiao Wei, 
general manager at Jundushan. 
    However, some serious skiers and snowboarders say China's 
ski resorts still can't compete with overseas options.  
    Ray Ruan, a 32-year-old experienced snowboarder from 
Beijing, only rides in China for the convenience. 
    The snow quality isn't great, he said on a recent weekday at 
Jundushan.  
    "When I have time, I still prefer to go to Japan." 
($1 = 6.2809 Chinese yuan renminbi) 
 
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China's ski resorts img    http://tmsnrt.rs/2Druzr2 
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 (Reporting by Pei Li and Elias Glenn; Editing by Philip 
McClellan) 
 ((Elias.Glenn@thomsonreuters.com; +86 138 1600 5903; Reuters 
Messaging: elias.glenn@thomsonreuters.com)) 
 
Keywords: CHINA ECONOMY/SKIING