ABOVE: Wanda Group’s Han Show in Wuhan
By Joe Kleiman, IPM News Editor
(February 4, 2015) —Two of China’s biggest players in the location based entertainment market have announced they are entering their next phases of development.
On January 29, Chimelong’s Hengqin resort, home of 2015 Thea Award recipient Chimelong Ocean Kingdom, began work on phase two of the resort, which will comprise a circus venue, an indoor marine park, and a wildlife safari park. Phase one of the resort will be complete this year with the opening of the 2000 room Chimelong Penguin Hotel, the 700 room Chimelong Circus Hotel, and inside the theme park, China’s largest 5D theater.
Since it’s opening last year, Chimelong’s Hengqin operation has featured a permanent venue for circus performances, featuring acts from around the world. Opening as part of Phase two of the resort will be a second circus venue, this one featuring one of the world’s largest membrane structures housing a 5000 seat arena.
The 300 hectare Wildlife Kingdom will feature both day and night safari portions, with theaters, jeep, boat, and rail safaris, with live animals from around Asia and Africa. The park will feature the latest in multimedia technology to showcase its collection and will include prehistoric as well as modern animals.
A ten acre indoor marine life park will be added to Ocean Kingdom. Highlights will include a ten story ferris wheel and a 6000 seat arena for marine mammal performances (although the particular animal has not been confirmed by Chimelong, early concept work for the park indicated plans to house killer whales, an animal also slated for Haichang Holding’s Polar Ocean World park in Shanghai).
On January 17, Wanda Group Chairman Wang Jianlin made his annual state of the company report for 2014, which included a unique look at the company’s tourism operations. His comments are taken directly from a transcript of his speech provided by Wanda:
Wanda’s two cultural projects in Wuhan, the Wanda Movie Park and Han Show, are respectively the world’s only indoor film theme park and first world-class stage show respectively. You have all watched, and were surely stirred by it yesterday. And we still have a secret weapon that we have yet to unleash, the Han Show has 11 underwater devices, of which a few has not activated yet since we need time to train our performers. I believe that the next few months of hard training will help make the upcoming Han Show a thrilling one.
These two projects exhibit not only cutting edge content, but also innovative design. The Han Show Theater’s architecture was inspired by traditional Chinese red lanterns; the Wanda Movie Park’s architecture was inspired by the golden bells of Hubei. These two buildings are now cultural landmarks in China.
The Han Show and Movie Park fill a gap in China’s hi-tech cultural industry. With the central government pushing for the cultural industry’s development in a big way, how should this be carried out? How do we achieve popularity and critical acclaim? These are the issues being explored. These two projects will help answer the question as to how the cultural industry could develop innovatively, which is to be “Chinese, well-liked and profitable”. Firstly, we must have Chinese cultural elements. We hired world-class experts and the best teams to handle the Movie Park and Han Show’s design and content production. Right from the start, we made it clear that Chinese elements must be thoroughly applied. Whereas others might draw from western culture, Wanda must take it on itself to develop the cultural industry since it is China’s largest cultural enterprise, it is therefore necessary that we use features representative of Chinese culture. Our buildings are Chinese, our stories are Chinese, and our performances are also Chinese; next, we want our shows to be popular, such that everybody will want to re-watch them; more importantly, they have to be profitable. So how do we make it Chinese, popular and profitable? Based on Wanda’s experience, the cultural industry must integrate innovation, technology and scale to truly achieve significant development and results. Over the last few years, Wanda will complete a series of innovative cultural tourism projects, which I believe will further vindicate my judgment.
For the first half of this year, tickets for the Han Show and Wanda Movie Park have completely sold out, which created a sales miracle in the global industry. Although tickets have been sold out, we must continue to explore how we could allocate movie-goers to different showtimes and avoid having everyone come on the weekends or holidays.
In 2014, Wanda began work on two large-scale cultural tourism projects, the Wuxi Wanda City and Guangzhou Wanda City. Qingdao Oriental Movie Metropolis, Wuxi Wanda City and Guangzhou Wanda City are the three key attractions of Wanda’s cultural tourism business and their opening will surely delight everyone. I heard that work began on Wuxi Wanda City, Shanghai Disneyland increased their investment in an attempt to catch up. This shows the influence we have, and not just a minor one at that. This is competition, and that’s a good thing. By 2020, Wanda will have opened at least 10 major cultural tourism projects, which I’m afraid would cause Shanghai Disneyland and the soon-to-be-constructed Beijing Universal Studios to rethink their budgets. We have a trump card that allows us to engage in a price war. Wanda generates its investment funds through property sales, so it does not incur financing costs during the construction phase; Wanda’s scale allows it to procure on a large-scale and keep its project costs at very low levels. The Wuxi Wanda City and Guangzhou Wanda City will respectively compete against Shanghai Disneyland and Hong Kong Disneyland, and we intend to fight this fight and compete using two core indicators, namely visitor numbers and revenue, to determine the winners. Wanda will show that this is China’s century, and that the best creations will be Chinese.
Starting this year, Wanda’s cultural tourism projects will be enjoying a bumper period. The Xishuangbanna Resort will open this year and our Wanda city projects in Hefei and Nanchang will do so next year. After 2017, at least three cultural tourism projects will commence operations every year. We must manage these cultural tourism projects well, for we can gain a foothold with Wanda’s cultural tourism model if we hit our operating income targets.
He also spoke of Wanda’s overseas real estate developments. This does not include a $1 billion mixed use property investment in Sydney, Australia announced on January 26.
Overseas investments in five-star hotels. In 2014, Wanda acquired four overseas assets in Madrid, Chicago, Los Angeles, and the Gold Coast, all of which are set to become landmarks in their respective cities. The Madrid acquisition is located in Plaza de España. If you drew a cross on the map of Madrid, Wanda’s acquisition would be found right in the center of that cross. Buildings in Madrid are generally only 30-40m high while Wanda’s is 117m, making it stand out as an urban landmark. The Chicago project is located in the center of the city and close to the Millennium Park and Chicago River. It is the third highest in the city. The Los Angeles project is located in Beverly Hills, an area which the rich and famous call home. This plot of land has been considered the best in Beverly Hills for the last two decades. Opportunities present themselves to those who are prepared. If not for the effort and time we spent, this acquisition would not have been ours. Gold Coast is an emerging city in Australia that only started to develop during the past five decades. This city boasts a 53km long beach with fine white sand, hence its name. Despite a population of only 700,000 or so, the city has been ranked as a top ten global tourist destination in the past few years. In 2013, it hosted more than 21 million overnight visitors, with the average visitor staying for more than eight nights. Wanda’s acquisition consists of the only buildings in Gold Coast that are directly beside the beach, these three 200m towers will serve as a landmark for the entire city and have been referred to as the Three Jewels.
International goals for 2015 inlcude:
Focus on acquisitions, with investments as a supplement; complete two to three large-scale acquisitions in 2015.
Confirm three Wanda Vista hotel projects overseas. Overseas hotel projects should still follow the traditional model, which incorporates residential development to balance our cash flow.
Expand our overseas talent pool. The HR center must an appropriate overseas talent pool; this is a cost that we can undertake to ensure that we have personnel available for projects, instead of having to search for people after our projects have started.
While Wanda continues growth, it is also entering what the Chairman calls its fourth restructuring with a change of emphasis on how it conducts business:
Wanda’s rapid growth and success over more than 20 years hinged on its ability to constantly innovate and restructure. Our first round of restructuring occurred in 1993 when we expanded beyond Dalian. Wanda’s transformed from a local enterprise into a national one, this unshackled its regional constraints and helped lay the foundations for its expansion. The second round was in 2000, when we transitioned from a purely residential business to commercial properties, this move brought innovation to Wanda’s business model and turned Wanda Commercial Properties into a dominant power in China, as well as a leader in the global property market. Wanda’s third restructuring began in 2006 when it entered the cultural tourism industry in a big way, this shaped Wanda from a purely property-based business into a comprehensive corporate group. 2015 will see Wanda commence its fourth restructuring, and this one will happen on a greater scale, both in breadth and depth.
Wanda Group’s restructuring can be broken down into two facets. In terms of size, it represents the group’s transition from a Chinese enterprise into an MNC. In terms of content, it signifies the group’s transition from a property-focus enterprise into a service-based one. Wanda has already announced its 2020 development targets, which is to grow its assets to RMB 1 trillion, its revenue to RMB 600 billion, and its net profit to RMB 60 billion, thereby turning it into a world-class MNC. Concurrently, we want to ensure that we hit two specific restructuring targets: 1. Have the group’s service industry revenue and net profit account for more than 65% of its total revenue and net profit by 2020; have its property sales revenue and net profit account for less than 35% by 2020; 2. Have the group’s overseas revenue account for more than 20% by 2020. Going forward, Wanda Commercial Properties will be implementing a new development model and accelerating the development of its cultural tourism, finance and e-commerce businesses. By 2020, we would have established four major sectors, namely commercial property, cultural tourism, finance and e-commerce, thus fully completing our restructuring and upgrading process.
Do not assume that only the group itself is responsible for restructuring, Wanda Commercial Properties must also undergo its own restructuring. Firstly, it has to push for a “light asset” model. Wanda’s past success relied on its urban complex model. We would build a Wanda Plaza, then build some residential apartments and buildings in the surrounding areas, as well as shops for sales revenue, we would then invest the cash obtained from property sales into our Wanda Plazas. This is an “asset-heavy” model. Wanda is now pushing for a “light asset” model. This means that a Wanda Plaza’s design, construction, attracting tenants, operations, intelligent cloud system and e-commerce system will all be handled by Wanda itself. We will use the Wanda Plaza brand, but all investments will be externally funded and the assets will be owned by investors. This model does not involve property sales and is considered a quasi-financial investment behavior. Business development is not hindered by property trends or price fluctuations, thus we are ironing out economic cycles and stabilizing our revenue. At present, Wanda has signed investment agreements with four corporations, these agreements are worth RMB 24 billion and will cover 26 Wanda Plazas. We are also in talks with local and foreign investment banks, institutions and funds. My requirement is for us to sign 63 “light asset” Wanda Plaza investment contracts in 2015. This means that we will be confirming the contracts for the 23 and 40 “light asset” Wanda Plazas that will open respectively in 2016 and 2017, and collecting RMB 30 billion in cash within the year. With the introduction of the “light asset” model, Wanda Commercial Properties will enter the “light & heavy” development path. We have decided to hasten our development because Wanda’s strength lies in attracting tenants, construction and management. The 26 Wanda Plazas slated to be opened this year are already under construction and there is no way for them to switch to the “light asset” model. The number of Wanda Plazas to be opened this year will remain unchanged, and we will begin to open 50 Wanda Plazas or more annually from next year onwards. Our target is to have opened more than 380 plazas by 2020, after which we will continue to accelerate our pace of development. If we reach our 2020 target, a 20% decline in the number of visitors to Wanda Plazas, based on the average figure for last year, would still imply an annual visitor flow of more than 6 billion; if every person visited a Wanda Plaza 20 times every year, that would add up to 300 million. Wanda will become the world’s largest offline consumer platform and gain strong competitive advantages. When we form such a large offline consumer base and combine it with our O2O e-commerce model, we will be without equals. Some people have said that Wanda’s foray into commercial property is akin to the construction of a moat around our business. If this is the case, this moat will get deeper and wider soon. Beginning in 2015, Wanda will enter a phase centered on the generation of profits through our corporate brand, commercial resources and core competencies. This is the result of many years of effort. We will not abandon the “asset-heavy” model in the few years. Instead, after implementing the “light asset” model for a few years, and once turnover rent has reached an ideal level, we will be shifting Wanda’s focus to this model.
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