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Insights & Inspirations| A Case Study of Fenghuang Ancient Town by Zhou Wenjie


Zhou Wenjie
Genaral Manger of Investment and Development, Sunriver Holding Group Co., Ltd

Thank you for giving me the floor.

Distinguished leaders, dear peer members, and dear friends in Shandong,

I find the order of speaking very interesting, and very thoughtful. First we had a speaker from a state-owned enterprise sharing the case of Wucun, and then another speaker from a foreign-funded enterprise sharing the case of Italy. Now, it is my turn and I speak for private enterprises. But first of all, I have some serious questions for Mr. Secretary-General: Does Italy need poverty alleviation? Does Wucun need poverty alleviation? They are not as poor as we are, and what we are fighting is real poverty. I’m just joking to lighten the mood a little bit. Now I would like to share with you in detail the case of our ancient town Fenghuang.

To be honest, what the two speakers before me shared was intriguing, but did not satisfy our thirst. I guess maybe they were not letting all the cats out. I will tell you what it is like working in the culture and tourism industries, and give you a case of ethnic minorities as I’m one of them.

I believe most of you have heard of the ancient town Fenghuang, but few of you have heard of our company Sunriver. So first of all please allow me to give you a brief introduction to us Sunriver Holding Group. We are a private enterprise specializing in the culture and tourism business and just celebrated our 30th anniversary on August 15 this year. We build tourist and vacationing destinations, and we have been ranked among the top 20 Chinese tourism enterprises for four consecutive years.

I also believe that many of you have visited the ancient town of Fenghuang, and known something about it. But I doubt you know the story behind the ancient town of Fenghuang. In fact, this Fenghuang project is distinctly driven by the purpose of poverty alleviation. Let’s start with the Fenghuang county. It is located in Xiangxi Tujia-Miao Autonomous Prefecture. As you all know, Xiangxi is known for its toughness and poor transport conditions, which hinders its economic development to some extent. But just a few years ago, there was a cigarette factory, and the industry was doing well. But unfortunately, before the county started to develop tourism, the cigarette factory was closed, and the economy collapsed. As a result, the county began to look for a way out and turned its eyes to tourism. Fenghuang owes the development of local tourism to Mr. Ye Wenzhi, a veteran in the tourism industry. In 2001, Mr. Ye signed a franchise agreement with the Fenghuang Ancient Town, which I will explain a little bit. Franchise at that time was quite rare for the operation of ancient towns, especially for scenic areas, so the agreement Mr. Ye signed in 2001 was a bold move. He paid about 833 million yuan for the 50-year franchise, but it’s not a lump-sum payment. He paid about 30 million yuan as down payment, and some more in the two years of construction, with the rest to be made up in the following 50 years – about 17 million yuan a year. It was not easy to do that at that time. As we all know, Hunan has never been shy at being a pioneer in the tourism industry, as can be seen in the case of Zhangjiajie National Forest Park. So the deal just pulled through step by step. In the later stage, due to various reasons, the project operation was actually difficult. In particular, in 2013, the Fenghuang Ancient Town made national headlines for charging the entrance ticket, which infuriated the merchants and local residents living in it. Then the entrance fee was exposed, attracted a lot of controversy, and eventually canceled.

There are many scenic areas across the country and they need the ticket revenue to sustain, especially to cover the expenses for constant upgrading and transformation. So what makes the Fenghuang Ancient Town an exception? Why did it cancel the ticket? My hometown Lijiang is also an ancient town. I think my hometown fellows are smarter. What we charge in Lijiang is called the ancient town maintenance fee. As nearly every visitor would go to the ancient town and Yulong Snow Mountain, we will check at the Yulong Snow Mountain Scenic Area or at hotels whether you have paid the ancient town maintenance fee. Of course, ticket evasion still exists, but still most of the tourists pay. Moreover, it’s not a ticket, but the ancient town maintenance fee. Later the Fenghuang Ancient Town tried to follow suit, but failed due to poor execution on the ground.

Due to all the controversies caused by its ticket policy, the Fenghuang Ancient Town had to abandon it and its tourism business was suddenly in serious trouble. Until today, the Fenghuang Ancient Town charges the entrance ticket for only nine tourist attractions, not the entire scenic area, but most tourists won’t stop by the paid attractions. In this context, how could you revive tourism in the ancient town? It’s a question worth serious consideration. We acquired the project in 2017, and I think it’s a big challenge: How could we revive this project? How could we make it sustainable?

The concept of “sustainability” was introduced into China decades ago and we have been studying it since then. In my understanding we used to place more emphasis on environmental, or ecological sustainability: No to ecological damage; yes to ecological conservation and sustainability. But that phenomenon had deep marks of the times. Why did we promote sustainability back then? It’s because at that time, across China there was construction and more construction, investment and more investment. The ecological damage thus caused was severe, so when we talked about sustainability, we were talking about ecological and environmental protection. But today, China’s urbanization rate has reached 64%. What does that mean? It means that we are in the late stage of urbanization. When we reach the level of 70% to 80% as Europe and the United States have done, we will be in the post-urbanization era. It means that the real estate industry has transitioned from the golden age to the silver age and then to the current bronze age. The days have gone for extensive investment and construction by profiting from real estate. The Chinese society has changed from an investment-oriented to an operation-oriented society. In the course of transformation, all enterprises will certainly face some problems. So what kind of sustainability we are pursuing ? Our priority is business sustainability. Construction is only part of the story. Later Mr. Tian will share their practice with us, and I’m particularly interested in their business logic and in how they manage to sustain large-scale investment and construction. That’s the biggest puzzle to me. I am a straightforward person, and I think it’s important to raise the question; otherwise business sustainability is impossible. Then, how did we get the Fenghuang Ancient Town out of the dilemma?

I think there were two factors at work. First, the 50-year franchise right we have. But you need to ask yourself first: why did an enterprise go for the 50-year franchise right in the first place?

The first reason, of course, is the abundant resources and endowments Fenghuang boasts. But if you want to rely on nothing else but resources and endowments, it will be like any other traditional scenic area, such as the Palace Museum or Mount. Huangshan. In that case, we don’t have to do anything; we can just sit there and make big money collecting the entrance fee. But only a few scenic areas are that good. Moreover, the government has kept asking scenic areas to lower the entrance fee, which poses a very big challenge for us: we cannot sit on our resources alone, nor can we charge tourists for entrance. What should we do? The answer is innovation and creativity. Innovation and creativity are nothing but marrying cultural and creative ideas with technological innovation, to give the scenic area the wings of culture, and make it more cultural. For me personally, the so-called culture-tourism integration is a pseudo-proposition, for the development of tourist resources won’t work without culture. It’s not that the culture and tourism industries are integrated because the Ministry of Culture and the National Tourism Administration are now merged. In fact, the integration already happened before that. Without effective integration of culture and tourism, no cultural or tourism project would work. Therefore, to me the issue of integration is more an administrative one than a business one.

Second, technological innovation. Technology will surely create a good, original tourist experience. But let’s keep in mind that tourism is by no means a rigid-demand industry in the national economy. Therefore, real technology won’t be introduced to the culture and tourism industries the moment it’s developed, but will wait until it has been proved successful in other sectors. I don’t think there are many technologies that have been directly applied to the culture and tourism industries. In fact, we have done a lot and achieved some success to make it happen for the benefits of local people and local government. Today I have a real-life case I don’t want to you miss.

We once developed a leisure & vacationing scene called “Border Town,” which was one of the first traditional live performances in China, and it’s still being staged until now. Before the show was launched, tourists would spend the daytime hanging around and checking out the homestays in the ancient town, and enjoy some drinking and shopping at night. But that’s not enough. As we all know, Fenghuang is home to several famous historical figures, including Huang Yongyu, Shen Congwen, and Xiong Xiling, etc. They are all household names in China. Among them, Shen Congwen was most famous for his novel Border Town with the story set in Xiangxi. So we borrowed the heroine Cuicui from the story, a beautiful local Miao girl, and produced an immersive live show called “Cuicui’s Water Wedding.” Why is the wedding on the water, not on the land, you may wonder? For our business to sustain, we private enterprises must make money, and we do that with our cultural and creative business. Without the ticket revenue, what is the next biggest money tree? The answer definitely points to the unique local mode of transport in the scenic area. Tuojiang River and the sightseeing boats cruising on it are now our most reliable revenue stream. As we all know, a boat this size accommodates only a dozen of seats at most, and it is paddled. We initially set the ticket price at 80 yuan each. A price higher than that was realistic and unlikely to get approved. Later, we launched “Cuicui’s Water Wedding,” which has become a marketing sensation on the Internet, with the official account on Douyin alone attracting more than 100 million views. It is a low-budget show, with only three performers. The scroll you see unfolding on both sides of the river is about 100 meters long, painted by Mr. Huang Yongyu. At night, the scroll is projected onto the walls on both banks to give passengers the immersive experience. For that we spent nearly forty million yuan. That is the original idea of our Sunriver team. As to the matter of sustainability, you may wonder: how can you recover the investment? Upon completion, the project won high recognition from the Xiangxi government. I think the most important thing for destinations is to be win-win. You need to be win-win to win the support of the people, the government and peer companies; otherwise, you’re doomed. So a win-win situation for all these stakeholders must be achieved. During the National Day holiday last year, we received two state leaders who spoke highly of their experience at the ancient town. Later, local leaders came to us and said that the ticket was too cheap and suggested an increase to 300 yuan. But it was too risky for a price jump that big, so we only doubled it from 80 yuan to 160 yuan. By so doing, we are not violating the state policy about lowering the ticket price for we charge no entrance fee. Besides, we did put a lot of money in it and have improved the consumer experience, which deserves a price raise. So our investment of 50 million yuan is guaranteed to recover and our boat tickets are selling fast.

So far I haven’t mentioned anything about poverty alleviation. In fact, most of the people there are ethnic minorities, and to be honest, somewhat suspicious about outsiders. But if you can bring them true economic benefits, and make them rich, they will surely welcome you with open arms and won’t hesitate to help you out.

Let me give you some examples. In private enterprises like us, the employment policy is quite flexible and we allow individual employees to play multiple roles. For example, the girl who plays Cuicui is now an online celebrity and runs an official account on Douyin with a lot of subscribers. She sells our company’s products on the platform and the sales is booming. And there are the boatmen. They work 8 to 12 hours a day, but they are not paddling all the time. During intervals, they would go onshore and distribute leaflets to the visitors, pitch their service or products, including the nine paid tourist attractions, the sightseeing boats, shops, etc. To increase their income. Meanwhile they are very proud to work in the company.

Of course, we’ve done more than that in terms of cultural & creative business and technological innovation. We have a light luxury resort brand called Xiong Mansion. We reconstructed nearby abandoned courtyards to create this high-grade homestay and offer guests an amazing experience. The room rate of homestays in the scenic area used to be 200-300 yuan, or 300-400 yuan per night at most. Now, for a night at Xiong Mansion, the guests are willing to pay more than a thousand yuan. It’s an upgraded product of our cultural & creative ideas and technological innovation, and has delivered real benefits. Only with sustainable operation can we effectively reduce poverty; otherwise neither will sustain, for both goals are intertwined and inseparable from each other. Since day one, we have been determined to work with the staff, the people and the government to make it work, and to truly reduce poverty in a sustainable way. We will continue to innovate and adjust our marketing strategy and products to the consumers’ psychology and taste. This is our guideline.

As you can see in the picture, this is a scene of “Cuicui’s Water Wedding,” attracting crowds of tourists. We have organized other events, including the annual art exhibition and the game of Go, which require larger investment. As a business, we need to consider the input-output ratio in some sense. If some events are too costly, I have to consider my annual marketing budget. So far I’ve shared with you the direct outcomes of our poverty alleviation efforts, and explained our thoughts and ideas.

To sum up, first, a sound top-level design is vital for cultural and tourism projects. If the top-level design is bad, the project will fail. Just as I said, the design must be a win-win: profits for you and local people, and social benefits for the government. You can not simply leave a mess for the government to clean up behind you. Second, since we are here, let’s take things as they come. It’s important to directly engage local people. The products we develop must be rooted in local culture and we must maintain good relations with local community.

That’s all. Thank you.