This past weekend, half vacation and half inspection went to Wuxi Rong Chuangwen Tour, one of the flagship projects of Rongchuang Culture Travel Group. Today, I came back to talk about my feelings.

Rongchuang Wenzhou Travel sector was acquired by Lao Sun in 2017, taking advantage of Wanda's shaky times, when he bought 13 Wenlun cities and 76 hotels, plus the brand design and operation management rights acquired further at the end of 18 years. The total cost is about 80 billion.

Because these projects began to open one after another in 18 years, Wen Lu's income in 18 years is only 2 billion, 19H1 is only 1.1 billion, and the income scale is still negligible compared with residential development, so there are very few people who focus on it. However, if you look at the volume of assets, they cannot be ignored. Nearly 200 billion of self-owned assets (theme parks, hotel complexes, conference centers, stage shows, bar streets, Rongchuangmao, etc.) will precipitate in these 13 cities and collect rents for a long time. This figure is already equal to the total market capitalization of Sunac.

For these cultural travel projects, Wang Jianlin, who single-handedly built them, has always placed high hopes on them. There is a book called "Wanda philosophy: Wang Jianlin's way of Management for the first time." it collates Wang Jianlin's public speeches on large and small occasions over the past decade. There are many paragraphs that mention literary brigades, and I carry some over:

For example, Wen Lu is called "the aggregator of Wanda cultural industry".

For example, "I have paid little attention to commercial real estate in the past three years, and I have made every effort to pay attention to cultural tourism."

Even, for the Wuxi Paradise I visited this time, he also said proudly that he was "sure to surpass Shanghai Walt Disney Company in the two core indicators of attendance and operating income." (please note that the average daily number of visitors to Shanghai Walt Disney Company is over 35000.)

As a financial shareholder, I came to Wuxi Paradise, which has been open for half a year, with such an ultra-high expectation. However, when I stepped into the gate of the park at noon on Saturday, it was a basin of cold water.

There is no more apt adjective than an empty bird. Almost all the projects are "chartered", with no more than four or five people playing with pirate ships, bumper cars, merry-go-round and 3D movies. In every park, which is a landmark roller coaster, we walked directly through the several-hundred-meter-long queuing area and sat in the first row of the roller coaster, waiting for several minutes, but no third person appeared. the staff next to us murmured, "just let the two of them drive," and then pressed the start button.

I met a couple during the break. The boy looked at the empty paradise and said, "are there 300 people here?" "frankly speaking, I really don't think so. there should be more than 200 people, probably not as many as the staff.

In addition, the occupancy rate of the matching hotel is also very low (the occupancy rate of the hotel is less than 20% on Saturday night), the bar street is still in a rough state, the Taihu Lake show has not been performed recently, and SeaWorld is generally popular, and the Water World will not open until April. There are few online celebrity restaurants in Rongchuangmao, and no one needs to wait for dinner. The only thing that pleases me is that the snow world is very popular, and it should be that southerners have a strong desire for snow (the ticket is about 300, and you can ski for 3 hours, roughly calculating that the income on Saturday should be 20 or 300 thousand yuan).

In fact, the logic of Wen Lu is similar to that of commercial real estate, and the core isHook the ground。

The local government has obtained the commercial resources that the local government originally lacked, carved out a brand new city (or region) business card, promoted employment and tax revenue, and helped to increase the value of the surrounding land (these projects are usually located in new areas). In order to get more revenue.

Companies, on the other hand, get what they want most-a large piece of land that is super cheap, and the saleable value of the matching land.

We talked about Metro Holdings's financial model before: the investment of a Wuyue Plaza is about 700 million, while the sales profit of supporting residential, Golden Street and office buildings is almost 700 million, which is equivalent to earning a whole Wuyue Plaza with property development. It can receive about 90 million rent every year, about 40 million net cash flow, and maintain a steady growth rate of 3% over the years. (of course, not everyone can do this financial model. Next time I have a chance to talk about this topic, I would like to suggest flipping through Lao Wang's book first.)

The Wanda Wenlun asset package acquired by Sunac is the same, which contains about 650 billion of the salable value, and can get a profit of about 130 billion after full sale. this figure is almost the same as the investment in theme parks, hotel complexes, bar streets, Wanda Mao (Rong Chuangmao) and Xiu Theatre, that is, the money earned from property development is exchanged for such a lot of self-owned assets and long-term rent collection.

However, the biggest feeling of my trip to Wuxi isCompared with commercial real estate, it is too difficult to travel.。

Unlike Wanda Square or Wuyue Square, it belongs to a simple and rough hard rent collection model, basically receiving rent for every square meter of construction, parking fee for every square meter of underground garage, and people who come in have a strong willingness to spend. Owners of surrounding houses can come several times a week to provide a stable basic passenger flow. As for these large-scale cultural and tourism projects in Wuxi, too much investment can not directly generate income, it belongs to the ticket economy, and local citizens cannot spend frequently, so they need the "soft power" support of content and operation to radiate the broader urban agglomeration around.

To be fair, Wuxi Rongchuang Park has been impeccable at the hardware level. Exquisite detail design, excellent service attitude, every project is modeled and styled, and the sensory experience can be said to be as good as Walt Disney Company. It can be seen that Lao Wang really spent a lot of money and money in Wuxi.

Unfortunately, it is not who makes the park more luxurious, but who has eye-catching content and IP. In this sense, Wuxi Rongchuang Paradise is somewhat hollow. When I came back to face questions from relatives and friends, apart from "the roller coaster is very enjoyable," I couldn't even think of any recommendations to say, which obviously didn't make any appeal to them.

When I valued Chuangchuang before, the requirement for Wenlun was low enough. A return on assets like Wuyue Square is completely undesirable, as long as there is a 1 per cent (2 billion a year return), it is excellent. Revenue can cover operating costs, that is, pass. But if you can't even level your cash flow by yourself, you need blood transfusions every year, and you can't even send ABS in the future, then it will really become a piece of "negative equity".

Helplessly, at least in Wuxi, I think it is very difficult to reach the passing line. You may say that it is the off-season before the Spring Festival, and the popularity is almost normal, but don't forget that these parks in Wuxi and Nanchang are targeted at Shanghai Walt Disney Company's annual passenger flow of 13 million, as well as business income of 10 billion yuan.

In his speech at the Abuli Forum in 2018, Sun Hongbin expressed his understanding of the culture and travel sector. the effect is that the amount of investment in the city is large and the threshold is high, so the supply is small. with the increase of residents' tourism and holiday consumption, the rate of return of the project will also rise, from 1% to 2% to 20%.

After going to Wuxi, I began to disagree with this business logic.

Looking at the more profitable cultural and tourism projects in China, such as the ancient feelings of the Song City of Hangzhou, the three snow-capped mountain ropeways of Lijiang tourism, the Sanya Atlantis of Fosun Travel, and the Walt Disney Company Paradise in Shanghai, they obviously do not win by the large scale of investment and the high threshold. But there are success genes behind it: either choose the address in a holiday resort or online celebrity city, and create your own uniqueness among the many local tourism resources (the aquarium in Atlantis, the eternal love show you must see in your life), or you are the charismatic IP that can attract people from the surrounding cities and even the whole of China (Walt Disney Company Paradise).

If there are projects with large passenger flow and high gross profit (200 yuan for a cableway ticket in Yulong Snow Mountain and 800000 yuan at the box office for a performance in Songcheng), it can basically be called a good business with high ROE.

But without these, no matter how big the investment is, no matter how high the threshold is, it will probably fall into the water, and there will not be any sound, followed by the sentence that once shouted, "our goal is to make Shanghai Walt Disney Company not profitable in 20 years." disappear with the wind.

I can't be a big cow, and don't become a vampire. Rongchuangwen's asset quality is my only worry about Rongchuang at present.

In addition to Wuxi, Guangzhou, Kunming, Hefei and Xishuangbanna Wenlu City have opened at present. If it is not far from your home, I hope you can go to the scene to have a look, feel, and come back to give me some feedback.

Once it turns out that they can't reach the "pass line", we'll have to make some adjustments to both the NAV valuation and the core profit PE valuation (but don't get me wrong, I don't think the share price is overvalued). Because I am afraid that the outstanding sales, unsold value and settlement profits that we regard as real gold and silver may not necessarily fall into the pockets of shareholders.