28 Dec 2016
Manufacturers and Site Operators Set to Cash in on Mainland Ski Boom
With winter sports now enjoying a huge surge in popularity across the mainland, significant opportunities are emerging in the manufacture of ski accessories as well as the operation of properly managed snow resorts and training facilities.
Scheduled for February 2022, the Beijing-Zhangjiakou Olympic and Paralympic Winter Games are now just over five years away. In the build-up to the tournament, skiing – always one of the highlights of the Winter Games – has enjoyed a huge surge in popularity across the mainland. As well as growing interest on the part of the public, its uptake has been nurtured both by investment in new facilities and training and by official policy support on the part of the government.
This official endorsement was made clear in November this year when China's General Administration of Sport, alongside a number of other ministries, issued the Ice and Snow Sports Development Plan (2016-2025) and the National Winter Sports Facilities Construction Plan (2016-2022). By 2020, in line with these plans, the government is anticipating that the mainland ski industry will be worth some RMB600 billion, rising to RMB1,000 billion by 2025.
These forecasts are based on a number of clear trends identified through recently-released official statistics. According to the August 2016 Annual Report on the Development of the Ski Industry in China, for instance, there were 568 ski resorts operating across the mainland by the end of 2015. This was 108 more sites than were up and running in 2014, representing 23.48% growth. Given that the 2015 figure is 298 higher than the number of sites identified in 2010, this represents growth of 110.37% over the five-year period. By 2022, it is estimated that as many as 1,000 ski sites will be operational.
According to industry sources, this surge of interest in skiing began in 2014. Shang Li is the Marketing Director of the Magic Ski School, the organisation that first introduced a US-style ski-school system to China. Looking back over the sport's development, he said: "For the 2014/15 season, just 30 people enrolled in our winter camps. For 2015/16, though, we had more than 300 applicants. This year, we have already had 600 applicants and we hope the final number will be around 800. At present, the total value of our advance online and offline sales is already more than RMB4 million."
Similar growth has also been reported by Zhang Chen, Co-founder of Everkid, a specialist provider of outdoor activities for children. He said: "When we launched the company in 2011, very few parents were keen on their children taking ski lessons. For the 2015/16 winter season, though, more than 200 have already signed up for ski classes. We expect the final figure to be in excess of 500."
Overall, two factors are seen as the primary drivers of this boom in the ski industry. Firstly, there was the endorsement by a number of official policies, notably the Healthy China programme. This encouraged people across the country to improve their fitness and bolstered the sports industry as a whole.
Secondly, there has been the emergence of the post-80s and post-90s generations as distinct new consumer groups. Typically, members of these groups have been more open to trying new sporting and leisure activities, including skiing, while also being keen to involve their children in such activities.
Geographically, the development of the mainland's ski industry has followed the national strategy of nurturing expansion in the South and the West. One company that has clearly followed this pattern is Beijing-based Tus Qiaobo.
The company has plans in place to build 12-15 indoor ski domes over the next three years. At present, construction work is already under way at four sites – Ma'anshan, Chongqing, Xuzhou and Nanning. Other companies in the sector are understood to have plans to develop similar facilities.
The rapid expansion of the mainland ski industry, however, has also highlighted a number of problems, many of which the sector has yet to address. Most notably, there is no official industry approved quality standard, while there is also a shortage of properly trained staff and support facilities.
It is the shortage of properly qualified ski instructors that is seen as the most pressing issue, a problem only exacerbated by the lack of any official training standard. Naturally, this has led to growing concerns that proper safety requirements are not being adhered to.
One consumer with direct experience of this downside to the industry is a Ms Wang. Having bought passes online, she and three of her friends visited a ski resort just outside Beijing. Despite having no previous skiing experience, they were not advised to hire an instructor, resulting in a subsequent accident that left the whole group unwilling to repeat the experience.
Even had she hired an instructor, however, it is far from guaranteed that her overall experience would have been markedly improved. Typically, most mainland ski instructors are local residents, employed on a part-time basis and lacking any official qualification. This problem is seen as having been further compounded a similar shortage of experienced managers and technical operators. With qualified staff in wide demand, many managers flit from one company to another, while professional snowmaking technicians and snow plow drivers are almost impossible to find.
The fact that the ski industry is also highly seasonal and geographically constrained has also added to its overall lack of development. As most ski resorts are only open for about three months per annum, this means operating costs cannot be spread across the whole year, and also tempts many mainland skiers to travel abroad to participate in their favoured sport. In terms of costs, at many of the mainland's resorts, visitors have to pay thousands of RMB to cover ski passes, instructors' fees and board and lodging. Crucially, without spending significantly more, enthusiasts could enjoy a skiing holiday in Japan or Korea.
Another problem facing the mainland ski industry is the business model adopted by many resorts. While such sites in Europe are largely operated on a local community basis and the US ski industry is dominated by a small number of large companies, in China the owner-operator model is the most common. Another feature of the mainland industry is the preponderance of ski resorts privately-run by lovers of the sport. As many of these are not operated on a strictly commercial basis, they often suffer from an unwillingness to innovate on the part of their owners.
Given the necessity of operating across a large area of land, the ski industry has also been seen by some as a real-estate proposition. A prime example here is the Mylin Valley Ski Resort, a development owned and operated by the Mylin Holding Group. Mylin's core business is real estate and it is already looking for buyers for a number of its ski properties.
The industry has also caught the attention of a number of other real-estate developers, including Vanke and Wanda. This year, the Vanke Lake Songhua Resort announced the launch of a joint venture snow industry investment consultancy in association with Jilin's Beidahu Ski Resort. This new company, Wanshan, is said to be the largest ski resorts operation and management company currently operating on the mainland.
Within the industry, such huge injections of capital are seen as likely to trigger consolidation across the market as a whole, resulting in a smaller number of larger, well-regulated companies coming to dominate the sector. In the light of such a sea change, the smaller operators are expected to focus on the more bespoke niche sectors in order to survive.
It is also expected that this inflow of private capital will help bridge the many existing gaps in China's ski-industry chain. Speculating on the likely consequences, Zhang said: "Skiing is a high-tech sport. At present, most of the ski equipment used across the mainland – including skiing accessories, ski wear and snowboards – are produced overseas. As the ski industry continues to expand, however, there will be immense business opportunities for domestic manufacturers."
Another factor likely to have a significant impact on the future of the mainland ski industry is the growing popularity of digital accessories and virtual training programmes. It is believed, for instance, that virtual-reality technology will allow for safe ski training to be provided well away from the slopes. At the same time, GPS monitoring systems are proving a huge boon in terms of boosting on-site safety.
On top of that, a number of dedicated skiing O2O platforms have also been developed. At the forefront of this is GOSKI, a smartphone app that allows users to buy ski passes, watch ski instruction videos and form individual ski groups.
Li Nan, Special Correspondent, Beijing