In Depth: China, golf's wild East

In Depth: China, golf's wild East
Sean Dudley
By Adam Lawrence

China has become the engine driving the golf development industry. But is the country’s golf boom built on solid foundations? Adam Lawrence investigates.

For golf development, in 2010, China is where it’s at. With new course construction at a virtual standstill in the United States, and slow in much of Europe, China has become the most important market for golf architects and the rest of the development industry.

At any gathering of golf architects, one can generally divide the attendees into two categories: those who have a flourishing China-based business, and those who would like one. “Every third booth at the recent China golf show in Beijing seemed to be a golf course architect,” says American designer Dana Fry, who, like many of his colleagues, is currently spending a high proportion of his time in the country.

There are other markets – India, Brazil, Korea – where golf is being planned and built in quantities, but nowhere that can match China’s twin attributes of large-scale new wealth and a political environment that allows developers to get access to large chunks of land at a relatively low cost. The authoritarian nature of Chinese government means that projects, when they are greenlighted, can get going with remarkable speed, compared to the planning crawl so common elsewhere in the world – and this in a country with a well-publicised official moratorium on new golf course construction officially in place.

“There are a number of projects that have been stopped during construction. The Chinese government has the ability to move rather quickly, which has pros and cons. They can move quickly to stop a project, but equally they can react to economic issues quickly where needed,” says Brian Costello of JMP Golf Design, which has been active in China for years, and has built a substantial number of courses in the country.

Although there is no doubt the Chinese are taking to golf in increasing numbers – industry insiders report packed driving ranges all over the vast country – actual course development, at the moment, is only tangentially related to demand for golf. Rather, golf courses are a tool for land speculation, and a way for developers to hitch a ride on China’s booming housing market. As yet, there are very few courses in the country that are not tied either to housing or hotel projects.

“The Chinese golf market at the moment is all about potential,” says architect Richard Mandell, who has recently started construction on his first Chinese project, at Zhangjiajie in Hunan province. “So many people have land plans on the table, but no money to move toward design. Because the government controls the purse strings to a certain extent, the red tape is probably slowing things down more than the access to money, although investment in such a new and foreign idea is also a roadblock. From my contacts in China, there are only about 150 active golf course projects under construction, yet if you talk to golf architects, everyone has about four or five projects. I am afraid many of those are just simply hanging on a wall waiting for a market.”

“There are two types of golf course projects in China: those that are sanctioned by a local government. and those that are not,” Mandell adds. “The Communist government’s stand on golf is that they are against it but they seem to allow golf course projects to just move ahead. Once they are there, then they accept the projects. The same is true of the local authorities that do not approve projects. That is why one hears such conflicting info regarding golf projects: ‘There is a boom; no, the government is against them’. Both sides of the coin seem to be accurate.”

But in one particular area, there’s more than just potential. Hainan Island, just off the Chinese mainland in the far south of the country, is the world’s current hotspot for golfing development. With a tropical climate – and thus the potential for year-round golf tourism – Hainan, long a sleepy agricultural backwater, has been designated as a special tourist development location. Golf is playing a massive part in this process, and, indeed, the government has officially lifted the golf course construction moratorium on the island.

“Hainan in the mid 80s had a boom-bust – a lot of money came down here and there was a big land rush,” says Brian Curley of Schmidt-Curley Designs, which is probably the most successful golf architecture firm in the Chinese market. “Some stuff got built, the government saw what was going on and pulled the plug. You can still see the carcasses of these half-built structures – they just ran out of money.”

Curley is leading Hainan’s flagship project, the enormous new resort complex being built by the Chu family, owners of Mission Hills in Shenzhen on the mainland. With six courses already either open or just about ready to open, Mission Hills Hainan may yet end up being even larger than its mainland progenitor.

“When we were doing Mission Hills Shenzhen, we hired a shaper who showed up to shape with five surfboards – and every chance he had he’d go down to Hainan, and he’d come back telling me how great it was,” says Curley. “So I kept saying to David Chu, the chairman, that we should do something down here. Mission Hills was all set to go with another site on the mainland, but the local government got cold feet because of the moratorium. So they changed track to Hainan.”

“When the chairman decided to go with Hainan, we took a big tour round the island – I think I’ve seen every piece of property there is round here,” Curley goes on. “Architects are always beefing about not being involved in site selection, but we were totally involved in this one. For us, there were two main limiting factors. Lots of developers are happy to find enough property for eighteen holes and some houses, but we had to find a much larger piece and one where someone was prepared to make a commitment to go ahead straight away.”

The site Mission Hills chose was located fifteen minutes from Haikou, the island’s capital. While many of Hainan’s golf projects are focused on waterfront sites, Curley soon realised that a beachfront property on the scale that was required would be impossible to find. “Location trumps great property in so many respects. Human nature is to go to the closer place rather than one further away,” he says.

The chosen property, which was mostly volcanic rock, needed a lot of work to turn it into appealing golf courses. “Lava is good and bad,” says Curley. “Even though it’s not the sandy terrain I would have liked, we’ve managed to adapt it and work the rock in, so it has a stunning look about it. Mission Hills bought a property about 20km away that was basically a big clay mountain. We whittled that down, trucked it in, 24 hours a day, and capped the site. There’s a metre of cap material all over the place and two metres at greens. Once it’s capped, you look at it again and put things where they want to go.”

Curley says he learned during the build of the original Mission Hills in Shenzhen that mega-projects on this scale require new thinking, both in design and construction. “If you’re going to have ten courses, you don’t want them all to look the same. We did a photo-study and started categorising courses, trying to label them, anything from rugged and natural links to Augusta. The majority of the work has been done with very little drawing production. I’ve started dealing more in concepts – I call them dos and don’ts. It’s not as though you say ‘I want something that looks like this and I’ll see you in two months’. I feel like through the whole process I’ve had good control over what’s been going on, but we haven’t done an awful lot of plans beyond routing and basic strategy. It’s a much better process. On some projects, because of the contractor, you need the perfect set of plans. The beauty of this one is that we’ve assembled a team and we build in-house. I never have to ask. Mission Hills has total trust in us, so I don’t have to go to the owner for every decision, and I don’t have to battle the contractor, because we are the contractor.”

Few in the industry doubt that Hainan has legs, and will go on to be a very successful tourist destination, attracting visitors from across Asia. But there is major concern about the pace of development, and in particular the possibility of a catastrophic bubble in real estate prices. “Today, there are probably 25 golf courses, of which a fair number have been built in the last two years. My guess is there will be a hundred within a few years,” says Brian Curley.

“The concern I have is that you can’t have that many Mission Hills and have it make sense. I don’t think it’s a healthy model – there could be several projects that follow that model and then fail,” says Brian Costello of JMP. “There is real potential for asset bubbles in China in both commercial and general real estate. Sustainability and long term growth of the market is possible, but it’s such a Wild West mentality of unbridled development. But there are many successful projects you can point to – that we can point to – where clients have sold out a hundred units in an afternoon.”

Hainan property values are, unsurprisingly, volatile. Real estate prices on the island surged after the announcement last December of the government’s tourist development strategy. GDP growth in Hainan is running at over 25 per cent, with real estate accounting for around a third of that. But the last three months have seen big falls in commercial real estate prices and transaction volumes.

“You have to worry about Hainan, because there’s so much being built, so much already built and still so much in planning. Everyone you talk to down there is doing projects that are two, three, four courses each,” says Dana Fry, who has two courses in development on the island. “The real scary thing is the bubble situation with the housing market.”

Brian Curley, though, is more sanguine. “I think Hainan has legs,” he says. “There’s a lot of positives going on. Mission Hills is making a big statement, not just in infrastructure, but in events. Over time, more people will treat this place not as a winter destination but as an environment to live in. The air quality and the environment compared to most of the mainland is very appealing. Government is trying to slow housing prices down – prices in the rest of the country have dropped quite a bit, but my understanding is that they have held fairly steady here, because there isn’t much inventory. The majority of buyers so far have been mainland Chinese. But a lot of the clubs here were built by Koreans and most of their customers are Korean. Even if Korea had another thousand golf courses tomorrow, they still have a season – you can’t play there in the winter.”

The key question though, is where the golfers are coming from. Everyone in the golf industry has heard the projections of thirty million Chinese golfers within the next ten years, and few dismiss them out of hand: China is a place where the seemingly impossible tends to happen on a daily basis. But there is great concern among many industry observers. British architect Tom Mackenzie, who has spent a fair amount of time in China of late, expresses the general opinion well. “When you see the scale of Chinese cities, it’s not hard to believe those numbers are possible. If only one in a thousand are interested in taking up golf, then it’s a lot of people,” he says. “There is definitely potential to attract golfers from elsewhere in Asia – Japan and Korea, for example, because it’s cheaper and they can get on. And there are lots of young golfers, middle class professional types. Round Beijing there are plenty of publicly accessible places to play golf if you can afford to pay the green fee.”

Yet there is caution too. “I’ve never seen a full house at any course I’ve visited in China. I’ve seen busy driving ranges, but never a full golf course,” says Richard Mandell. Brian Curley, though, says the real issue is the strength of the Chinese economy and real estate market. “You build these courses to get land to build residential,” he says. “You get the land, but then you have to do something with it. You take the money you would have spent buying the land and you use it to build the golf courses. And the cost of maintaining courses here is pretty low. When the development comes on stream a few years later, then you get golfers. It’s hard to put a number on what the true number of players is going to be. There is potential for a massive number of new players to pop up almost immediately.”

Chinese golf, up to press, has been almost entirely about land speculation, with the golf courses themselves generally regarded as an amenity more than a central part of the business plan. But Brian Costello, for one, reckons the Chinese golf industry is maturing pretty rapidly. “There’s a desire for golf for golf’s sake, and I’m sure it will happen,” he says. “Are there golfers who would be interested in that? Absolutely.”

Among the most exciting projects in this respect is Bill Coore and Ben Crenshaw’s first Chinese course, Shanqin Bay, on Hainan, which is currently being grassed. And Costello says plenty of Chinese people get what golf is really about. “We have a client for whom we’re doing our third project,” he says. “We took him over to Scotland to play golf, and we were concerned about how he would react, but he retooled his swing to give a lower ball flight, and he loved it. They’re travelling and experiencing great golf courses, and bringing that knowledge back, and realising that what they have here doesn’t match that. There are wonderful sites becoming available, and it’s a pleasure and a privilege to be able to build golf on them.”

China's regions take to golf

Although it was the major metropolitan areas of China in which golf first took hold, the country’s regional cities are increasingly the hotbeds for development. “The second and third tier cities in China generally have a million inhabitants, and there’s a lot of golf being built in these places,” says Dana Fry.

“These regional cities have great potential for golf,” says John Strawn, president of American firm Hills/Forrest, and a seasoned observer of the golf market. “If you look at Shanxi province, which is about an hour’s flight south of Beijing; there are cities of about a million people, very nice, very clean and they have no golf at all. These regional cities will each want at least one or two courses. At every stop on the new high speed train from Beijing to Shanghai, people are looking to do golf – the train gives the opportunity for weekend houses where the property values are much less. And there is still a huge amount of general development in China – new administrative cities, new infrastructure – with high quality suburban rail lines and light rail, linking regions together in a very efficient way.”

“For the Hunan government, my project in Zhangjiajie is a keystone project that they hope will be the centre of golf for the province,” says Richard Mandell. “And for the local government, it is an important expansion of the tourism economy here. This project is in the centre of the city five minutes from the airport in a region which is the equivalent of the Grand Canyon in the United States.”

This article appeared in issue 21 of Golf Course Architecture, published July 2010