Hengqin projects take shape as Macau looks for a crowd-puller

By Matthew Ossolinski*

A Macau casino company CEO recently told a group of investors, “Hengqin is the most underreported story about Macau.”

While many in the gaming and hospitality industries increasingly take note of Hengqin’s future plans, projects are beginning to rise from its ground. Cratered construction sites of a Cotai magnitude, along with extensive underground infrastructure, reveal the subterranean clues of projects yet to come.

Hengqin Island, a stone’s throw away from Macau and three times its size, is a Free Trade Zone in China with unique policies. Through these policies and transportation links with Macau’s Cotai Strip, master-planned Hengqin is set to be integrated with Macau’s economy over the next few years.
Many analysts and industry observers see the development of the island’s tourism facilities as being the real game changer for Macau as it tries to transform itself into a mass market leisure destination.

The island has the space to develop a diversified offering likely to appeal to a broader audience and the space to accommodate a much higher volume of visitors.
The following is an update of the current state of development on Hengqin.

 Chimelong

While 70 percent of Hengqin is designated as green space and off limits to development, a few large scale projects are already operational. For example, the two largest hotels in mainland China have opened their doors. Together with its third recently opened hotel, this gives China’s Chimelong Group around 5,000 hotel rooms on Hengqin.

Chimelong’s existing properties are the first phase of its Hengqin plans: Up to 12 hotels and as many as 9 theme parks. When all phases are completed over the next few years, it expects 50 million annual visitors.

To date, it has opened a circus and the first of these theme parks, the Chimelong Ocean Kingdom. According to a report by the Themed Entertainment Association and AECOM, this park alone attracted 5.5 million visitors in 2014. In the same period, Hong Kong’s Ocean Park drew 7.8 million while Hong Kong Disneyland attracted 7.5 million. According to Chimelong, visitation was up 30 percent in the first half of 2015. Measured by visitation, Ocean Kingdom has now made the Chimelong Group one of the top ten theme park groups globally.

In its annual global rankings, The Themed Entertainment Association assessed: “Chimelong Ocean Kingdom theme park complex opened in Zhuhai to big numbers and rave reviews including a Thea Award for Outstanding Achievement.”

 Other Projects Up & Running

To the north of Chimelong, in Hengqin’s central valley, is the Hengqin Tennis Center. The first of its two phases opened this November when it played host to the internationally telecast WTA Elite Trophy - Zhuhai. Where village oyster farms stood a few years before, tennis greats from around the world volleyed, with Li Na making an appearance and Venus Williams winning the tournament.

 Just across the river in mainland Zhuhai (the Chinese town of which Hengqin is a part), the Sheraton Zhuhai Hotel also opened this autumn, alongside the Zhuhai International Convention & Exhibition Center. A St. Regis hotel and office tower are to follow, all to be connected to Hengqin by rail.

Earlier this year, a Club Med resort opened on the offshore island of Dong Au, connected to Hengqin by ferry.

An immigration and customs facility at the bridge between Hengqin and mainland Zhuhai is complete though unopened. Local authorities say it will open “soon”. When it does, Macau vehicles without a China license plate—some at first, more later—will be permitted to drive on Hengqin though not enter mainland Zhuhai.

Other operational facilities on Hengqin include a small but temporary financial district (to be replaced by the permanent financial district in a few years); a zone of new offices built to accommodate start-ups; and some industrial facilities in Hengqin’s northwest corner.

 In the Works

Galaxy Entertainment Group has not yet broken ground on its 2.7 square kilometer Maldives-style resort. Insiders expect MGM Resorts International to be among the next Macau gaming operators to announce its large-scale, non-gaming tourism and hospitality project on Hengqin.

Most—but not all—of Macau’s gaming operators are expected to follow. Some of these operators might be forced to enter Hengqin through joint venture projects in which they hold a minority stake.

Shun Tak Holdings and Macau Legend Development have already announced their mixed use projects, both located near Hengqin’s border with Macau.

In partnership with a Hong Kong conglomerate, Lions Gate Entertainment announced plans in October to build a Hunger Games entertainment center on Hengqin. More theme park projects are expected to be announced, drawn by the proximity to the critical mass-centric Chimelong and Macau’s casinos—much in the way Walt Disney World as a destination resort drew other theme parks to Orlando, Florida.

This month, Ferretti Group plans to break ground on its marina and mixed use project on Hengqin’s northern shore. Among others, the Massachusetts General Hospital has announced its own facility.

 Infrastructure

Hengqin’s island ring road and its accompanying heavy infrastructure are 80-90 percent complete.

The Hong Kong-Zhuhai-Macau Bridge goes directly to Hengqin and is expected to be open in 2017.

The “spur line” extension of China’s high speed rail network from Zhuhai to Hengqin is underway with a target completion of July 2018. The same line’s link-up by bridge to the Zhuhai airport will follow. The much-delayed Macau LRT is not expected to be completed by the time China’s train to Hengqin is operating. However, when it is completed the Macau LRT is set to cross into Hengqin from Cotai and converge with the same immigration facility that contains the China rail station. This combined facility is expected to become the world’s largest and busiest border crossing.

Slightly to north of that facility, a separate border tunnel is being planned between Hengqin and Macau’s Taipa district.

 Property

A handful of high end residential and office buildings have been launched for sale to the public. The first of these buildings is expected to be “delivered” to owners in 2016.

 According to recent market surveys conducted by GW Investment Consulting, the price for residential units on Hengqin is approximately two-thirds of their equivalent units in Macau. This is up sharply from three years ago.

In commercial buildings, office space is selling for about half the price of Macau’s. Based on factors including its discounted price and comparable markets, higher rental yield is being forecast for Hengqin’s office market.

Regardless of whether or how investors choose to participate, it can be agreed that Hengqin is an unprecedented experiment.

The first trip made by Chinese President Xi Jinping after his 2012 inauguration included a visit to Hengqin. He remarked: “With the blueprint drawn up and work off to a solid start, the future of Hengqin is much anticipated.”

--
* Matthew Ossolinski is the CEO of GW Investment Consulting, Hengqin Island GW Investment Consulting is proud to be the first international business consultancy on Hengqin Island. GW offers a range of services to its local and international clients on Hengqin.