Is History Enough?Lijiang doesn’t leap out at investors the way first-tier cities in China do — Beijing, Shanghai and Guangzhou. In fact, it’s not even rated as a second-tier city, which includes Tianjin, Shenyang and Wuhan. But the Yunnan Province town of 1.2 million (tiny by China standards) is leaping out at institutional investors: Accor’s Pullman Lijiang Resort & Spa, the Crowne Plaza Lijiang Ancient Town and Banyan Tree Lijiang, whose ultra-luxurious resort also has a residential component, are already operating in the city. Starwood brand St Regis is allegedly opening in 2014 to add one more five-star hotel to the mix.

With almost a millennia of history, Lijiang was once an active port of trade whose regional significance is evidenced within its remaining waterways. The pedestrian only Old Town is also remarkable for the Naxi culture and architecture that make it unique. The city’s UNESCO-rated old city is drawing travellers in record numbers, which begs the question: Can residential investors be far behind? Usually, where high-end leisure travel leads, property sales follow, an idea Banyan Tree was keenly aware of when it planned its residential component. “Lijiang has this gorgeous mountain and all the [Banyan Tree] villas face it. It’s gorgeous. Picturesque. And very close by is the UNESCO site … It’s a way to de-stress,” noted Dan Simmons, Banyan Tree’s residential director. “For people that do have high-pressure jobs, it’s so relaxing. Some of the roads are cobblestone. It truly feels like you’re a hundred years back.”

Banyan Tree actively targeted affluent Asian investors in its initial sales drive along with overseas buyers that saw value for their dollars. There’s no doubt the China for China travel market is massive — 2.1 billion travellers in 2010 — and it’s one of the reasons major hotel chains are moving into the country in droves. But as historic and lovely as it may be, does a town like Lijiang have enough to support a rental yield industry the same way other so-called one-trick ponies do? There’s little in Koh Samui except beaches and spots to lounge around and read — but that’s good enough for Samui. Is it enough for Lijiang?

In a hotel trend special report from mid-2011, CBRE cited some of the critical factors in developing a successful resort in China as being uniqueness of location, design innovation and cultural distinction. Lijiang would seem to have all of that locked up. “China has already shown potential for resort and leisure destinations, with Hainan Island demonstrating high demand for resort style hotels. However China’s regional diversity offers enormous yet unrealised opportunities for resort development based on unique cultural and natural environments, and I expect to see an increase in new emerging resort destinations in the future,” stated CBRE Hotels China senior consultant Annie Wang in the agency’s Limelight Asia report.

If the Lijiang market isn’t at the stage where the jury could be out it may at least be assembling. None of the major property players — Colliers, DTZ, Jones Lang LaSalle, CBRE and their ilk — currently has an office or any kind of presence in Lijiang and for now, residential pickings are slim. None would or could comment on the future possibility of a booming resort investment market like those in Thailand and even parts of urban China even though as it stands rentals are also hard to come by. Popular thinking may hold that domestic travellers won’t look for resort rentals, but upscale accommodation is simply another luxury product that Chinese travellers are demanding more and more. Most hoteliers agree the market is there. “Demand for experience based activities such as resort hotels, spas, wellness retreats and travel are expected to continue to grow in line with increased disposable income and increased leisure time. Many investors and developers are aligning their future hotel development strategies to capitalise on this market opportunity,” according to CBRE Hotels China executive director Keith Humphreys in the same report. Is Lijiang the next big resort market? Who knows, but it wouldn’t hurt to keep an eye on the old town. Just in case.