The Heart of China
Tourism is driving commercial and retail growth in this central China capital
Wuhan, capital of central China’s Hubei province, made three international headlines this year: tennis player Li Na from Wuhan won the 2011 French Open singles title, the world’s third highest building, the 606-meter Wuhan Greenland Center project to be built by 2014, and a 60-year ban on horse racing was lifted and weekly horse races are allowed to be conducted in the central city of Wuhan.
Aside from its primary industry strengths in traditional steel, iron, and auto industries, Wuhan is aiming to ramp up tourism development for international exposure. Focus is shifting to large investments in Wuhan which include recreational facilities, hotels, offices, commercial and residential properties.
Dalian Wanda Group invested US$7.9 billion over phase one of the Wuhan Central Cultural Zone in Wuchang district, which was opened in September this year in an effort to be “No.1 in China, first-rate across the world and an industry-leading role model”. The project portfolio includes three five-star hotels, two three-star hotels, eight international A office buildings and fifteen residential high-rises. Shimao Group from Hong Hong invested US$6.3 billion on a tourism estate with a construction area of over 8 million square meters in December 2009 in Caidian, a suburb of Wuhan, with tourism components including a big indoor theme park, a shopping center, luxury hotels, an international conventional center and an eco-community.
Shenzhen-based China Overseas Town is building four theme parks in the area, namely, Happy Valley, Playa Maya, Happy Kids and Eco Art Park, four cultural centers, two hotels and East Lake Bay which consists of a five-star hotel and an international cultural street. The location is close to Wuhan Central Cultural Zone. In 2010, there are 26 tourism projects under construction with a total investment around US$7.64 billion, 14 newly started tourism projects valued at US$10.04 billion, and another 18 tourism projects in preparation estimated at US$6.20 billion, covering tourism - hotels, theme parks, culture and tourism, shopping and commerce.
Li Jie, head of Strategic Consulting China from Jones Lang LaSalle, said, “Wuhan has naturally inherited some very good tourism resources, but they are mainly scenic spots, lacking interactive entertainment elements. A batch of on-going tourism projects probably upgrades the city’s overall tourism environment. The tourism industry will become Wuhan’s strategic pillar industry according to the city’s twelfth-five year plan, which aims to build Wuhan into the biggest MICE destination, a recreational city and a central tourism destination in Central China. The goal is to make the added value of tourism account for over 25% of the tertiary industry by 2015.”
Off to the races
Horse racing started in Wuhan 1902, which is historically considered China’s horse racing capital. The city re-launched horse racing in November 2010, after a 60 year ban. Travelers can participate in China Wuhan International Horse-racing Festival every October or spend a horse racing Saturday here. Zhang Jinrong, a Wuhan-based anaylyst from Centaline Property Agency, believed that horse racing will upgrade Wuhan’s status and attract high net worth individuals to watch the races, boosting consumption and channeling investment into the city.
Wuhan is also a key transportation hub between North and South China. The city’s high-speed trains connect seven major cities. It takes only three hours to Guangzhou, five hours to Shanghai. The four-hour routes to Beijing and Chengdu will come true next year.
Wuhan’s consumption is mainly driven by middle-class residents, as well as local college students and people from the neighboring cities. Zhang said, “The financial crisis has nearly zero impact on students’ financial status. During public holidays, they often go to Shanghai, Beijing and Hong Kong seeking for entertainment.” Though it is possible that Wuhan will soon meet their needs. There are 84 educational institutions here, including the well-known Wuhan University and Huazhong University of Science & Technology. “Most graduates in Wuhan now choose to stay and find a job in the city, instead of going to Beijing, Shanghai or Guangzhou,” said Zhang.
Wuhan’s retail sales in 2010 grew 19.5% to US$39.71 billion, with a strong compoment of lifestyle market demand, especially on entertainment and culture. Many leading shopping malls are aggressively upgrading their facilities to increase visitor traffic. Steven estimated that those tourism projects will bring expansion space for international brands which are “already on the radar” and that “lots of the big brands will come to Wuhan in 18 months. There will be a lot of growth, since Wuhan’s per capita shopping area is still very low.”
However, the rapid rise of the tourism sector is testing Wuhan’s service quality and transportation system, as well as middle-ranged hotels and retail sales facilities. Though tourism investment is hot, not all players will win. Steven said: “large scale property developers will have difficulty in the first year but I believe new projects will do well after one year of knock-out games. The losers will be those who do not pay attention to management.” Small developers are harder considering big developers have full commitment with tenants, he warned. Local analyst and resident Zhang admitted that Wuhan is still a tourist destination for locals, though it currently does not hold a big attraction to people from other cities.