China island sets sights on international tourism market

By John Ruwitch and Xie Heng

HAIKOU, China (Reuters) - With a tropical climate and unspoilt, palm-fringed beaches, Hainan has all the ingredients to become one of Asia's top tourist resorts.

But "China's Hawaii", as Hainan has been dubbed, only now seems poised to fulfill that ambition as it recovers from an economic slump that has left it lagging other parts of China.

For years, the 48-storey tower that is the tallest building in Hainan province gathered dust as a half-built skeleton like hundreds of other ill-fated construction projects caught in one of China's nastiest property bubbles.

Now construction is almost over and the plush Haikou Master hotel and serviced apartments is a symbol of the island's efforts to recover from a meltdown in the early 1990s after a wave of speculation pushed property into the stratosphere.

"Sales are going very well," said agent Hong Weibin as he showed a new luxury flat in the complex.

Almost all of the 16 million sq m (172.2 million sq ft) worth of construction left unfinished after the crash has either been completed or bulldozed, and investors are returning to Hainan.

The anything-goes development model is gone, replaced by an intense focus on forging the tropical island in southwest China into a tourist destination to rival Thailand's beach resorts.

Top resorts are opening in droves. The island is planning to broaden a visa exemption scheme, opening duty-free shops, improving infrastructure, building airports, expanding air links and promoting foreign language studies.

"Tourism is the industry in Hainan with the most distinguished features, the most potential and the most competitiveness," vice governor Chen Cheng said late last month unveiling a strategic blueprint for development.

"It's very attractive," said Ian Zheng, Managing Director of the Pacific Alliance Asia Opportunity Fund, which holds a $150 million stake in the group that owns Hainan's main airports and is also invested in a Beijing property firm working in Hainan.

"I really don't foresee any big, material risks."

NO LIGHTS ON

If the island's azure coast doesn't immediately attract droves of international beachgoers, then the fast expanding pool of domestic tourists will almost certainly prop up the industry.

The potentially huge Chinese market is a major draw for the resorts, who hope to leverage on the millions of people who have benefited from the country's economic boom and are increasingly adopting Western lifestyles and aspirations.

"Some of the estimates I've seen suggest 450 million middle class Chinese in 10 years from now," said the Banyan Tree Sanya's general manager Peter Pedersen. "I think Sanya has a huge potential." Last month alone saw the Ritz-Carlton, the luxury arm of the world's number three hotel operator, and the Banyan Tree open resorts in Sanya, where the island's premier beach resort sits. The Mandarin Oriental follows later this year.