Europeans account for only between 1 and 2 percent of all tourists to Hainan island, while Russians represent more than half of non-Chinese visitors. [Photo/China Daily]

 

Hainan has embarked on a new 10-year plan to compete with regional top draws like Bali, Phuket and Boracay by 2020 - a fairly ambitious plan, even by Chinese standards, given that 96 percent of its inbound tourists are Chinese.

But memories of a real-estate bubble that burst here in the early 1990s and caused expensive new hotel construction projects to be mothballed or canceled still haunt government offices.

"Personally I'm very worried about the property speculation that is going on, but it seems like the rest of the country isn't," says Li Baiqing, the Hawaiian shirt-wearing vice-mayor of Sanya, the island's main draw card for tourists.

"Sanya seems to represent a bigger problem that is emerging on the mainland," says Li, referring to other prospective bubbles in cities like Shanghai. "Even though we've started opening the door to foreign investment, maybe we need to backtrack a bit to prevent a catastrophe."

To give some indication of how fast prices are rising, properties sell for around 10,000 yuan (1,136 euros) per square meter in Dadonghai, one of the more popular, and cheaper, beach resorts in Sanya, or double this on its beachfront. In a neighboring bay, one unfinished luxury development is already selling for 80,000-90,000 yuan per sq m.

However, much of the problem is being driven internally, as newly minted Chinese speculators dump their wealth into the island's legions of untenanted apartments and cause prices to spike artificially.

"There is a massive amount of gray income (in China) seeking a safe haven," writes Alberto Forchielli, a managing partner at Mandarin Capital Partners and a guest columnist for Thompson Reuters.

"According to some, shadow income could amount to up to 15 percent of GDP," he says.

If Hainan can pre-empt another property market meltdown, and iron out infrastructural and other kinks, it is positioned to lure European and other non-Asian tourists, says Philip Lim, general manager of the Banyan Tree Sanya.

"If you look at places like Phuket, they've been quite stagnant for the last decade. They have new resorts, but no new theme, whereas Sanya is a new destination for foreigners," says Lim, still sore from the day's catamaran lesson.

"Sanya also has beautiful coral reefs. It's probably the best place for diving in Northeast Asia, and there's a wide range of water sports," he says, noting that Bill Gates stayed at the hotel during the 2008 Beijing Olympics, several months after it opened.

Hainan also has world-class golf clubs, beautiful beaches and near-perfect climatic conditions - including a typhoon season, which suits the island's growing community of surfers - as it shares more or less the same latitude as Hawaii.

It is now building more five- and six -star hotels at one time than anywhere else on the planet, on a huge developmental project on Haitang Bay that will include a cinema complex and the island's first ocean park. Most of the area is currently walled off, with newly built wind-generating turbines fringing the unfinished road beside sweeping sand dunes.

"This is part of our project to follow an eco-tourism drive, which we think foreign guests will be paying more attention to in coming years," says the vice-mayor.

"The last I heard, they're going to have 35 big hotels there, with two five-stars opening this month," says Terry Ko, general manager of the Sheraton and Four Points, which will be ready for business on the eastern Shenzhou Peninsula early next year.

"There is an intention to make (Haitang) the premier international resort area. The industry here is just going to keep growing and growing."

The Banyan Tree plans to expand its 49 private villas to 109 next year, while Starwood, one of the largest four- and five-star hotel chains in China, will open seven hotels on Hainan in the next three to five years, according to the latter's press office.

Meanwhile, there are reports that the Sanya Bay Mangrove Tree Resort wants to build an integrated resort modeled loosely on the Venetian in Macao, replete with small canals that allow guests to be rowed to their rooms. In another pocket of the island, details of a planned aviation space park are being kept tightly under wraps. This joins a list of unique attractions that includes the island's first national geological park, which opened at the Shishan volcano clusters just outside Haikou in 2008.