Local governments strike gold at tourist sites

PUBLISHED : Saturday, 09 February, 2008, 12:00am
UPDATED : Saturday, 09 February, 2008, 12:00am

The recent tourism boom on the mainland, where domestic and foreign travellers unquestioningly pay a premium to explore many areas of natural beauty, has turned operators of the sites into stock analysts' top picks for their strong profit potential.

Even a National Development and Reform Commission circular last month banning price increases for entry tickets to ease the pressure of rising living costs is unlikely to have any negative impact. This is so because analysts expect operators will find ways to raise either ticket prices or transport costs at the sites.

In the communist spirit, the mainland's great lakes and famous mountains belong to its people, but the operating and pricing rights are largely in the hands of local governments. Their involvement with private companies to make the greatest possible profit has been rampant in the past few years. Though consumers have strongly opposed almost every proposed price rise, site operators have a free rein as local governments are organisers of the public price-setting hearings.

Academics have called for central government intervention, but Beijing's limited budget and a lack of control over local governments make this hard to realise.

Entry fees to the mainland's tourist attractions are among the highest in the world. A visitor to the World Heritage-listed Stonehenge in England can expect to pay GBP6.30 (HK$96.81), or slightly more than a British national's minimum hourly wage, to be guided around the monument. A comparable fee is charged for a week-long entry to the Grand Canyon national park in the United States.

The peak-season entrance fee to the scenic spot Huangshan in Anhui province is 200 yuan; to Jiuzhaigou in Sichuan, 220 yuan, and to Zhangjiajie in Hunan, 245 yuan. The 200 yuan ticket price is about 1.5 per cent of urban residents' annual disposable income of 13,786 yuan last year and 4.83 per cent of rural residents' income of 4,140 yuan.

Shen Jiacheng, a villager in Hongcun, Anhui, said he had not been to Huangshan, which is about 100km from his village, in the past 10 years. 'I'd like to visit the mountain again but the price is just unaffordable,' said the 56-year-old farmer.

In 2004, six tourist sites in Beijing called for a public hearing to raise ticket prices by up to 300 per cent, claiming the extra revenue would go towards better protection of the world heritages. The proposal stirred a huge controversy. But despite strong opposition, which included the public taking it to the media, government-selected delegates to the hearing passed the proposal. Attractions in other provinces subsequently followed suit and ticket prices were sharply increased.

Still, high ticket costs for the mountain and other famed attractions across the nation have turned few visitors away. Since the country launched the 'golden week' holidays in 1999 to boost consumption, the volume of domestic travel has risen by two digits annually.

In 2006, mainland tourists made almost 1.4 billion domestic trips, up 15 per cent from the previous year. Of these, 576 million were made by urban dwellers and 818 million by rural residents, according to the China National Tourism Administration.

The huge demand enabled local governments and site management companies to increase revenue even at the expense of public welfare, mainland researchers said.

'The market mechanism doesn't work for natural resources. The government must intervene to set up a reasonable pricing system and better regulate the sector. Otherwise, the companies will abuse their position of monopoly and set high prices which infringe on consumers' rights,' said Anhui University of Finance and Economics associate professor Wan Hongxian.

'The entry fee visitors pay is actually a resource tax. It should go to the central coffers directly instead of being kept by the local governments or site operators,' she said.

The central government has a limited role in the management of tourist sites, partly because it provides a relatively small annual 10 million yuan subsidy to 187 sites. The average 53,500 yuan for each site is far from adequate, according to the Badaling Great Wall management office.

The site's renovation cost 21 million yuan in 2001, 23 million yuan in 2002 and 16 million yuan in 2003.

According to the mainland's World Heritage Site protection rules, the sites should submit their revenue to their government authorities and apply for funding to pay for renovation projects. Badaling's financial statements show the site had about 30 per cent of its 130 million yuan annual revenue retained by the Yanqing county government from 2001 to 2003. However, the government did not grant any subsidy for renovation projects during the three years, forcing it to rely solely on revenue.

'We did not receive a penny from the government. We are just like a tree that sheds coins when the government shakes it,' a site manager said.

To sustain daily operating costs and renovations, the sites had to raise ticket prices - from 35 yuan to 60 yuan for the low season and from 40 yuan to 80 yuan for the peak season - in 2004 and rely on rents from souvenir stalls, the manager said.

Defending the central government's low subsidy to heritage sites, Beijing Tourism College researcher Song Ziqian said the mainland was a developing country and had insufficient funds to ensure low-priced tickets, as priority went to improving production and living standards in rural areas, education, technological innovation, social security and the medical system.

The mainland's fiscal revenue is expected to have risen 31 per cent year on year to 5.1 trillion yuan for last year.

While national tourist sites are operated as social welfare institutions, the remaining 4,000-odd attractions are either run by local government-controlled enterprises or private firms that share profits with local governments.

In a 2000 deregulation initiative, the NDRC granted ticket pricing rights to provincial governments. Since then, local governments have been actively seeking the greatest profit from their natural assets.

'The structure is formed gradually in China's opening and reform. Now it seems many officials' understanding of the tourism sector's reform is wrong,' said Professor Liu Deqian, the Chinese Academy of Social Sciences tourism research centre director.

That has not mattered to local governments; the tourism companies they run are reaping huge returns. Shanghai-listed Huangshan Tourism Development posted a 102 per cent surge in net profit for 2006, following a price rise from 120 yuan to 200 yuan that year. Guilin Tourism Corp reported a 19 per cent increase in net profit while Lijiang Yulong Tourism saw a 13 per cent growth.

Professor Liu said overpricing represented a loss of state assets and came at the expense of the people's welfare. Thousands of tourists wander around classical Ming and Qing dynasty houses at Hongcun that were included in the World Cultural Heritage list in 2000.

In 1997, Huang Nubo, president of the Beijing Zhongkun Investment Group, was invited by the Yi county governor to spend more than five million yuan to repair roads, upgrade hotels and improve the environment in Hongcun village. Mr Huang told Beijing media he expected two million tourists would visit the village this year.

If the ticket price remains at 80 yuan each, a revenue of 160 million yuan is expected for this year, with 33 per cent going to the county government.

Hongcun villager Shen Jiacheng gets only 800 yuan a year as compensation for living in the place being visited. 'No matter how high the price goes, I won't benefit from it,' he said.