Hainan Development
China Tourism Group and Swire Properties Sanya joint venture set to attract luxury heavyweights
An ambitious partnership announced last week will spur Hainan’s retail sector to new heights. Could this be the project that finally convinces some of the world’s biggest luxury brands, who have eschewed the Hainan duty free sector, to enter the broader retail market instead? Insiders think so.
One glance at the respective credentials of the two parties involved in Hainan’s latest major mixed-use project immediately suggests this could be a game-changer even by the province’s own remarkable standards of development.
On 24 October, property giant Swire Properties announced it is to partner with CDF Investment & Development Co. Ltd, a subsidiary of China Tourism Group Duty Free Corporation Limited (CTG Duty Free) to develop a retail landmark in Sanya, Hainan Province.
Publicly listed Hong Kong-based Swire Properties is a leading developer, owner and operator of mixed-use, principally commercial, properties in the Hong Kong Special Adminstrative Region and the Chinese Mainland with a glittering record of creating long-term value by transforming urban areas.
The Sanya project forms part of heady plans to invest HK$100 billion (US$12.7 billion) in the company’s core markets, including Southeast Asia, Hong Kong and the Chinese Mainland, over the next decade. Approximately half of that will be invested in the Chinese Mainland, with an aim to double the company’s attributable gross floor area in the region.
CTG Duty Free (China Tourism Group) is a travel sector powerhouse. It is the parent company of China Duty Free Group (CDFG), the dominant duty free player in the island province and the world’s number one travel retailer by sales according to The Moodie Davitt Report’s industry benchmark ranking.
The mega development, located in the heart of Haitang Bay National Coastal Recreation Park, will be Swire Properties’ eighth large-scale commercial development in the Chinese Mainland. Swire Properties and China Tourism Group will each hold a 50% interest in the project.
The development, located in Haitang District, will be Phase III of China Tourism Group’s vast Sanya International Duty Free Shopping Complex, covering a total site area of approximately 200,000sq m. However, and critically, this is a luxury retail rather than duty free project. As such, and given the lofty ambition of the development and its proximity to such a tourist magnet, this could be the drawcard that finally attracts the world’s biggest luxury brands such as Louis Vuitton, Gucci, Hermès, Dior, Chanel and others – who have hitherto declined to enter the burgeoning Hainan retail scene – to make their respective retail debuts on the island.
One senior luxury goods executive told The Moodie Davitt Report, “You can bet that all top brands will go there – this will bring all the brands that did not go to duty free. Most of the top five have already selected locations.
“It combines the power of CDF for duty free connected to this Swire project for lifestyle retail. It’s the only one of its kind in the world and it’s in the powerbase of Haitang Bay.”
A joint-venture company has been established to develop the site as a premium, resort-style, retail-led development, including underground parking and other ancillary facilities. The investment was announced after the JV company successfully acquired (via government land listing-for-sale) a site for commercial development in the Haitang District of Sanya, at a total price of RMB1.308 billion (US$179 million). The project is expected to be completed in phases from 2024.
“We are very pleased to be partnering with CTG Duty Free on this significant retail property development in Sanya,” said Swire Properties Chief Executive Tim Blackburn. “Thanks to its tropical climate and abundant natural resources, and accelerated by the Hainan Free Trade Port policy, Sanya has fast become one of the most popular travel and leisure destinations in China.
“This site presents an exciting opportunity to develop a high-quality retail complex to satisfy the growing demand for a premium retail experience in the region.”
“We look forward to collaborating with Swire Properties in Sanya to jointly develop a world-class, upscale commercial project,” said CTG Duty Free Chairman Peng Hui.
The China Tourism Group-Swire partnership will complement the hugely successful Sanya International Duty Free Shopping Complex in the prime Haitang Bay district
“This new development will have positive synergy with Phases I and II of the Sanya International Duty Free Shopping Complex and provide a premium retail experience alongside duty free shopping in the area.
“We believe this combined experience will enrich Sanya’s travel and leisure offerings, further attracting overseas visitors and putting Haitang Bay on the map as a tourist and shopping destination.”
“This will be our first ever resort-style retail complex. The design will embrace Sanya’s tropical coastline and unique ecological landscape, whilst taking inspiration from the traditional fishing settlements of the indigenous Dan community,” said Swire Properties Director, Retail Han Zhi.
“With the 22km coastline along Haitang Bay as a backdrop, we intend to curate a unique experience featuring premium retail with arts and cultural elements to create a major luxury travel destination in Hainan.”
The site enjoys excellent road, rail and air connectivity to Sanya Phoenix International Airport and Sanya Railway Station. The new development will also be connected by a network of bridges to the Sanya International Duty Free Shopping Complex, China’s leading duty free location by turnover.
Comment: This is a profoundly important development for Hainan Island’s status as the largest special economic zone in China. The development of the Hainan Free Trade Port (FTP) commenced in 2020 and a pan-island customs clearance operation will be set up by the end of 2025. Sanya is a key component of the strategy to develop Hainan into a high-level free trade port and an international tourism and consumption hub.
The remarkable success of the offshore duty free programme, launched in 2011 and enhanced in 2020, has been the engine room of growth for the Free Trade Port progamme. Now the drive to boost consumption and dual circulation is set to be considerably enhanced by a complementary expansion of the wider retail sector.
Crucially, the recent 20th China Communist Part National Congress proposed an acceleration of development at the Hainan Free Trade Port. This policy support underpins the grand ambition from the partners to create a world-class retail landmark and will further elevate Hainan’s standing as a regional tourist destination.
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The Moodie Davitt eZine Issue 316 | 31 October 2022
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